Foreclosed Properties in Panama Downsides and What to Do Instead (2025)

If you’ve been thinking about investing in real estate in Panama, you’ve probably come across foreclosed properties as an option. It sounds attractive: buying a house or apartment below market value, fixing it up, and selling or renting it for a profit sounds like a solid plan.

In a previous article, we covered the potential benefits of foreclosures, including the possibility of getting a great deal in a prime location. But before you get into this type of properties, it’s important to understand that foreclosed properties come with some downsides and risks. If you’re not careful, what looks like a good deal could turn into a financial headache.

The reality is that many foreclosed properties in Panama could require substantial repairs, come with rigid financing restrictions, and may not even increase in value over time. In this article, we will show in details these three major disadvantages and explore better alternatives for smart real estate investments.

The Downsides of Buying Foreclosed Properties in Panama

1. Hidden Costs of Repairs and Remodeling

One of the biggest misconceptions about foreclosed properties in Panama is that they’re all great deals. Banistmo, Banco General, BAC and other major banks usually have an diverse inventory of foreclosure properties at any time and sure, the unit costs they offer might be lower.

But what about the hidden expenses?

Many of these homes have been abandoned for months and years, leading to major issues that aren’t always visible at first glance such as:

• Structural damages from water leaks or past tenant neglect.
• Plumbing and electrical problems that require costly professional repairs.
• Mold, pest infestations, and deep filtrations that immediate attention.
• Outdated interiors that require full-scale remodeling to make the property livable or attractive to new renters.

These costs can add up fast, sometimes even surpassing the money you thought you were saving by purchasing a foreclosure. Without a detailed inspection and a solid renovation budget, you could find yourself in a bad situation.

2. Limited to Bank Deals Only

Another downside of buying foreclosed properties in Panama is that you’re mostly dealing with banks, not individual sellers. This sometimes can make the process more rigid than a typical real estate transaction.

Some scenarios like the following might come up, such as strict mortgage requirements, since banks usually prefer cash buyers or force you to get financing through them, which limits your flexibility; or longer approval processes, which could delay the acquisition of the property, and if you’re looking for a quick investment opportunity, this can be a big downside.

Instead of being locked into rigid bank deals, there are better options where you can negotiate directly with sellers and explore different financing options that suit your needs.

3. Risk of Depreciation Instead of Appreciation

Most real estate investors assume that property values will always go up, but that’s not always true, especially with foreclosures. There can be situations like the ones detailed below:

• Declining areas, where many foreclosures are located in areas that have less demand and economic development, making appreciation uncertain.
• Oversupply of properties, if a neighborhood or a specific building has multiple properties on sale, it can drive down prices, making it hard for you to sell at a profit.
• Lingering damage even after renovations, even if you fix up a foreclosed home, certain problems (like foundation issues or a bad location) can limit its long-term value.

What to Do Instead? Smarter Real Estate Investment Strategies

If you’re looking for a good deal in Panama’s real estate market, want to avoid the risks of foreclosures, but at the same time look for similar good opportunities, there are different ways to approach this:

1. Buy Directly from Owners

Instead of dealing with distressed properties, consider buying from motivated sellers. This could ensure that they have clear titles of ownership (fewer legal issues), more room for negotiation on the price, and properties could be in a much better condition, reducing repair and remodel costs.

2. Pre-Construction Properties

Many developers in Panama offer great deals on pre-construction homes and condos. This strategy comes with some big benefits, such as lower prices if you get into the project on the early stage, a big potential for appreciation in the short term, and flexible payment options. For more of this you can explore our previous article of buying pre-construction properties in this year.

3. Explore Short Sales Instead of Foreclosures

A short sale happens when a homeowner sells a property for less than they owe on the mortgage. There are advantages of finding deals like this since there is less competition, a big chance to negotiate with the owner, and a faster acquisition. Talk to a real estate professional to help you locate these types of deals.

4. Work with Experienced Real Estate Agents

If you still want to explore foreclosures or distressed properties, having the right professionals by your side is key. A good agent can identify for you real opportunities in the market, help you negotiate and ensuring that the legal titles and documents of the seller are in order.

At a first look, foreclosure properties in Panama seem like a golden investment opportunity, and sometimes they are, but in frequent cases there will be hidden costs of repairs, limited financing options, and the possibility of depreciation instead of appreciation, which could make these properties riskier than what they appear.

Instead of gambling on a foreclosure, consider alternative investment strategies that offer more security and long-term growth potential. Make sure you do your research, have a solid plan, and work with a real estate expert who can guide you in making good and profitable decisions.

If you are interested in finding good deals of real estate in Panama, please contact us!