Bait, Switch, Snatch, and Grab… a.k.a “Common Real Estate Practices in Panama”

Bait, Switch, Snatch, and Grab… a.k.a “Common Real Estate Practices in Panama”

Wednesday, October 05 2011 @ 10:46 AM COT
Contributed by: Don Winner
Views: 52
#Panama – By DON WINNER for – Received this morning via email: “Hi Don. I’ve been a regular reader of your blog for over 5 years and remember some articles about developers squeezing buyers out of their contracts at the 11th hour. Well, I now find myself in this position. The developers argue that the contract is now void because I haven’t presented them with the “carta irrevocable de promesa de pago”, even though they had communicated to buyers that the alternative would be to pay another 20% by November and the rest upon delivery. I’d value your thoughts on this. Many thanks and please keep those preciour articles rolling! Regards, P.”
Editor’s Comment: OK, here’s what happens. The developer has to sell units at “preconstruction” prices in order to raise the funding to build the project. Once they have about 50% of the project sold, the banks will lend them the money to build it, based on the potential sales value represented in those contracts. They get their loan, and they build. However after it’s been built, now the building actually exists, and it’s worth a lot more than what they sold it at originally, at the “preconstruction” price. Therefore, the builder wants to find ways to make you go away. If they can “trick” you into not complying with the terms of the contract, then they can easily argue in court that you didn’t fulfill your end of the bargain, and you will lose.

A “Communication” is not a “Contract” – Many people make the mistake of thinking that every telephone call or email from the developer carries legal weight. In most cases, they carry no legal weight at all. In court, a judge will look first and foremost at the details stipulated in the contract. The really easy question is – Did you comply with the payment schedule and requirements as stipulated in the clauses of the contract, or not? If not, then you might be screwed.

A Little Leverage Goes A Long Way: The good news is that most of the time the developer isn’t really looking to completely screw you over. They are just hard nosed and experienced businessmen who are trying to generate negotiating leverage. Meaning, once they tell you they are not going to honor your contract because you didn’t give them an irrevocable letter of payment on a specific date or whatever, their real intent is to get you scared, make you nervous, and to squeeze the difference out of you (the “preconstruction” price vs. the current market value.) And generally, your choices are to hire a lawyer and fight in court for thousands of dollars and no guarantee of winning, or spend those same thousands of dollars to negotiate, close the deal, and get your property. Which one are you going to take?

Ethics and Morals? Forget About It: This is a game being played with literally billions of dollars at stake. The “little guy” is the individual buyer, and the playing surface is not level because the developers have built and sold thousands of units. They have all of that built up experience, knowledge, intelligence information, and wisdom – and they are going to use it against you. What do they want? Money. Your money. Will they rot in hell for being greedy? Maybe. Maybe not. But whatever, they don’t care if you’re pissed off. Your chances of buying from them again are zero. And they will just find the next guy to piss off. It’s been working for millennium. In the year 4025, the owner of will probably get a very similar email. My advice – understand what you’re looking at and what you’re dealing with, then sit down and negotiate an “out” that’s the best “win-win” you can get to. Best of luck.

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7 Responses to “Bait, Switch, Snatch, and Grab… a.k.a “Common Real Estate Practices in Panama””

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