Foreclosure – finding bargains

If a property is sold at a foreclosure auction, bidders can find real bargains. In many cases, properties can even be acquired below the actual market value. Nevertheless, should not be blindly bid, because there lurk imponderables that can become expensive. It is more important to prepare comprehensively in order to take advantage of the available opportunities.

The forced sale for the realization of property

When taking out real estate loans, a land charge is often entered in the land register to secure the loan. It secures the bank the right to liquidate if the borrower can no longer meet its payment obligations. In such a case, the bank will first initiate the dunning process. The first reminder is followed by the second and finally the third reminder, which also includes the threat of forced sale. If no agreement can be reached with the borrower, a compulsory auction is ordered at the relevant district court. There the property is then auctioned in a public procedure. During the first auction a minimum value of 70 percent of the market value must be reached, in the second date the minimum price is 50 percent. This is to prevent real estate from being squandered. Only after the third appointment, none of the above limits apply and the object is sold to the highest bidder.

This is how real estate can be auctioned

If foreclosure auctions are pending, they are published in advance by the local court. Interested parties can thus obtain comprehensive information and finally attend the appointment on site. If a bid is to be submitted, the statement is checked first. In addition, a security deposit of ten percent of the market value is required. So if the market value was set at 100.000 euros, bidders must pay a security deposit of 10.Deposit 000 euros with the local court. This deposit is possible either in cash or with the help of a central bank check. This can be applied for at the own house bank. Bids can now be submitted within the 30-minute minimum bidding period. If numerous bids are received, the judicial officers can also extend the bidding period. If no more bids are submitted, the bidding period ends so that the highest bidder can be determined. This receives then the addition.

Bargains are possible

Due to the minimum bids, which are already significantly below the actual market value at the first date, it is quite possible to achieve real bargains in the course of a foreclosure auction. Especially if a property is rather uninteresting for investors and could not be auctioned off during appointments already made, a purchase at particularly favorable prices is possible. Before such a purchase is made, however, bidders should inform themselves about the following facts:

– Inspection of the property description (available in the district court)
– Study of the value appraisal
– Viewing photos and floor plans
– Inspection of the land register

Before submitting a bid, it is particularly important to pay closer attention to the property description on display in the local court, including the valuation report and photos. It gives an initial indication of the condition of the house and which renovations and modernizations are necessary. Based on this information, it is also possible to determine any additional costs that may still have to be incurred in order to move in ourselves.

Inspection from the inside usually not possible

If a property is foreclosed, this does not happen in most cases at the request of the owners. On the contrary, the bank demands the forced sale in order to be able to service still existing financial obligations. It is not uncommon for the owners to still live in the property, which makes it difficult to inspect the property. Those who know the location of the property can of course drive there and view the property at least from the outside. An inspection from the inside however is possible only with agreement of the owners. Although they should also strive to achieve the highest possible sale price to reduce existing debts, but if they are against it, nothing can be forced. Possible construction defects in the interior of the house may remain undetected. To still get the information you want, it may be advisable to talk to neighbors who may have already visited the property.

Experts should be involved

Ideally, those who gain access to the property should not go to the appointment alone, but should consult an expert. This can immediately identify any defects and usually knows what damage to properties from different eras to expect. On the basis of the age, the location and the building style, a possible need for renovation can be determined. Such a determination is often possible for experts even if the interior of the house may not be entered. However, it must be noted that these are then only estimates, which could be corrected upwards as well as downwards when entering the property. Such additional costs are particularly important if not only the purchase but also the renovation is to be financed by a bank. Indeed, before taking out a loan, it is important to prepare a financing plan that includes the following points:

– Costs for the purchase of the property
– Ancillary costs for notary, land registry, local court
– Renovation and refurbishment costs
– Costs for the construction of the exterior

The banks usually have the above items substantiated with a cost estimate. This is the only way they can assess whether the money is actually invested for the intended purpose and increases the value of the property. Finally, the house again serves as collateral in this financing arrangement.

A look at the land register speaks volumes

In addition to the valuation of the property itself, experts believe it is also important to take a look at the land register before bidding. Based on the data in the land register, the following can be seen:

– Owners of the property
– Size and type of use of the property
– Prior rights (right of way, right of residence)
– Amount of registered land charges

While both the owner, size and amount of the land charges are usually known, any existing prior rights often remain unrecognized without a close look. In the process, they can reduce the value of a house enormously. For example, if a right to live is entered into the land register, that person may stay here for the rest of his or her life. The future owner cannot do anything about it. This also applies to any rights of way and pipeline rights. For example, other people may not only be allowed to lay pipes through the property, but may even drive on it with their cars. Therefore, it is important to know any prior encumbrances and rights to be able to take this into account when bidding.


If you take all the above-mentioned contingencies into account and check the property carefully in advance, you can definitely find a bargain at an auction and fulfill your dream of owning your own home at low cost.

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