Buying Pre-Sale Property in Panama: Risks and Protection for Italians

Buying a property for pre-sale means buying a property that has not yet been finished. It is generally purchased based on plans, digital renders or physical models. This type of investment is especially popular in growing markets such as real estate in Panama and also in different real estate projects in Italy.

Nowadays, many Italians in Panama and locals are taking advantage of the real estate pre-sale in Panama to ensure more competitive prices, revaluation of the property once finished and greater ease of customizing finishes according to your tastes.

The typical pre-order process works like this:

1. Signing of a purchase promise contract: The buyer and developer agree on initial terms, price, estimated delivery date and conditions.
2. Partial payments or funding: Often an initial percentage (for example, 10%-20%) must be paid and then installments must be paid throughout the construction.
3. Delivery of the property: Once the work is finished and the deadlines have been met, the final deed is signed and the property is received.

However, it's important to understand that months pass between the initial signing and the delivery, and sometimes years, and during that time the circumstances of the project may change. Hence the importance of knowing the risks of buying pre-sale properties and how to legally protect your real estate investment.

Buying property in pre-sale offers opportunities, yes, but it also involves risks that, if not anticipated, can turn into real financial and legal headaches, both in Panama and in Italy.

Upon knowing the Risks of buying property for pre-sale in Panama you can take appropriate precautions. Among the main risks are:

• Construction Delays: It's one of the most common problems. Factors such as delayed permits, financial unforeseen events, or external events (such as pandemics or economic problems) can delay delivery well beyond the promised initial date.
• Changes in the characteristics of the project: What you see in renders isn't always what gets delivered. Without the right contractual clauses, you could receive a different product than you imagined.
• Developer financial issues: If the developer runs out of funds, the project may be paralyzed, transferred to another developer, or even never completed.
• Irregular land titles: Especially in international purchases, it is essential to ensure that the property has a clear title. Otherwise, you could face future legal claims.

To protect yourself, it is essential to require legal guarantees such as the use of services of escrow in Panama, hire a title insurance in Panama and have legal advice in drafting contracts that include contractual property protection clauses.

Investing in Panama through pre-sale models is still one of the best ways to grow your wealth, especially if you plan to establish your residence in Panama or diversify international investments. Understanding these risks is not intended to discourage you, quite the opposite: to prepare you to invest in a more secure, informed and profitable way.

When you decide to invest in a property for pre-sale in Panama, one of the best practices to protect your money is to use a Escrow (escrow account). This mechanism, which is increasingly common in transactions of real estate in Panama, allows a neutral third party to hold the buyer's funds until certain milestones agreed in the contract are met. It is an essential tool for minimizing Risks of buying property for pre-sale in Panama.

Escrow helps build trust between the parties: the buyer knows that their money will not be released until the developer complies with what was agreed, and the seller is guaranteed that the funds are available.

How does escrow work in Panama?

When you buy one property for pre-sale in Panama and you choose to use escrow, the process usually follows these steps:

1. A purchase promise contract is signed between buyer and developer.
2. The agreed funds are transferred to the escrow account managed by a bank or authorized trust company.
3. The money is released in phases, after confirming specific progress of the project (for example, completion of the structure or delivery of the occupancy permit).
4. If any party defaults, the money can be returned as stipulated in the contract established with the trust entity.

This system is used for both large and small projects, and is especially recommended when the buyer is a foreigner and wants to secure their investment while the project progresses.

Benefits of using escrow for pre-order purchases

• Financial Protection: your funds are safe until the development meets the conditions.
• Transparency: the rules of the game are clear from the start, reducing surprises or breaches.
• Legal Trust: the account is under the supervision of a regulated entity, which provides institutional support to the agreement.

For Italians in Panama or interested in Invest in Panama, this practice provides a critical layer of security in a growing market but with visible risks, especially when the country's legal framework is unknown.

When considering the real estate pre-sale in Panama, an attorney experienced in these operations can help you correctly include the use of escrow in your contract, ensuring that each term is clearly defined and executed.

In addition to escrow, another key measure to reduce risks in your real estate investment is title insurance, which we'll talk about below.

One of the most common mistakes among new foreign investors is to assume that, once a contract is signed, everything is legally guaranteed. But in the world of real estate pre-sale in Panama, there is a fundamental element that many overlook: the title insurance. This legal tool is crucial to avoid unpleasant surprises, especially in countries such as Panama or Italy, where registration systems can present inconsistencies or delays.

Un title insurance in Panama protect your property against legal problems that affect the validity of your ownership. This includes errors in public records, fraud, impersonation, previous unrecorded debts, or even conflicts over unresolved inheritances.

What does title insurance actually cover?

When you purchase a property for pre-sale, the project has not yet been delivered, so the insurance is activated when it is officially registered in your name. Even so, from the moment of signing, you can ensure that your purchase is not linked to previous legal problems.

• Protection against hidden debts: previous mortgages, foreclosures, or unpaid taxes.
• Errors in public documents: omissions, double registration or poorly drafted records.
• Fraud in previous transmissions: sales made by people without a legal right to do so.

Having this policy will give you peace of mind not only when making the purchase, but also when you want to sell or mortgage the property later on.

Why is it so important if you are a foreigner?

For Italians in Panama interested in acquiring real estate as part of an investment plan or to obtain residence in Panama, the legal system may seem complex. Although notaries and registrars are professional, there are important differences from Europe. Un title insurance serves as a bridge of trust between your expectation as a buyer and the legality of the local system.

In addition, in the context of pre-sale risks, where you don't yet have physical possession of the property, knowing that you have backup for possible legal unforeseen events adds a very important layer of security to your purchase.

As with the use of the Escrow, to ensure title insurance coverage from the start, consult your lawyer before signing any contract and include clauses that require the developer to give you a clear, free and insured title.

In the next section we will explain what contractual clauses you should specifically require to make both escrow and title insurance work in your favor.

One of the most important elements in reducing Risks of buying property for pre-sale in Panama is to have a well-drafted contract. This document must go far beyond a mere agreement of intent to purchase. It's your legal shield against delays, unexpected changes to the project, or even breaches on the part of the developer.

In operations of real estate pre-sale, signing without thoroughly reviewing the clauses may mean losing money, facing legal disputes or getting stuck in a project with no clear way out. Next, we explain to you what contractual clauses cannot be missed to protect your investment, especially if you are thinking of Invest in Panama from Italy or you already reside in the country.

1. Project detail and technical specifications

Your contract should clearly describe what you're buying: exact footage, location within the development, promised materials, and finishes. This avoids unpleasant surprises when the project is finished.

2. Date of delivery and penalties for late payment

One of the most common risks in pre-sales is the delay in the delivery of the property. This is why it is essential that the contract indicates a maximum delivery date (ideally with a reasonable grace period), and also establish penalties for unjustified delays.

A good practice is to include a compensation clause in case the developer defaults without major cause, such as natural phenomena or health crises.

3. Payment mechanism and reference to escrow

The contract should clearly specify how and when payments will be made, and preferably mention the use of a escrow in Panama to protect those funds until the project progresses as agreed.

A typical scheme includes phased payments linked to the achievement of certain construction milestones. This avoids paying in advance without real guarantees.

4. Terms of termination of the contract

You should avoid contracts that only protect the developer. The document must state under what conditions you as a buyer can withdraw from the transaction — for example, if the project is delayed too long or undergoes substantial modifications — and what type of reimbursement is appropriate.

5. Legal guarantees and right to complain

Every pre-sale contract must include the minimum guarantees established in Panamanian law, such as the right to claim for structural defects or habitability problems within a specified period after the delivery of the property.

In addition, it is advisable to require that the developer state in the contract that they are up to date with their legal records and construction permits.

6. Title insurance and registry management clause

Include the sponsor's obligation to process and provide the necessary documentation for the acquisition of a title insurance in Panama can prevent future problems related to land ownership or hidden liens.

It is also ideal for the contract to clearly detail who is responsible for the registration procedures and notary costs.

What if the contract is in Spanish and you're not?

If you are a Italian in Panama or investing from abroad, make sure you have a certified translation of the contract and have local legal advice. Don't sign anything you don't fully understand, especially regarding obligations to the developer.

In short, a solid contract not only reflects the agreements with the developer, but it also acts as your most important legal tool to protect your investment in real estate pre-sale in Panama or outside. Before signing, seek qualified legal advice that knows these types of transactions thoroughly.