Auction

Auction - A real estate auction is the public sale of a parcel of land or a building by a local court, in which the property is awarded to the highest bidder as part of a legally regulated procedure. A distinction is made between a foreclosure auction and a partition auction.

Procedure and Legal Basis of a Real Estate Auction

The foreclosure auction procedure is governed by the Foreclosure and Receivership Act (ZVG). It is initiated when a creditor-usually the financing bank-cannot enforce its claim against the owner by other means. The creditor files an application for a foreclosure auction with the competent local court. The court orders the auction, appoints an appraiser to determine the market value, and sets an auction date.

In contrast, a partition auction is not about satisfying a creditor but about dissolving a joint ownership. Typical cases involve communities of heirs or divorced couples who cannot agree on a private sale. The procedure essentially follows the same course but is initiated by a co-owner. A partition auction is often a last resort when an agreement has failed-it typically results in significant financial losses for all parties involved, as auction proceeds are consistently below market value.

On the auction date, anyone who deposits a security deposit equal to ten percent of the appraised market value may bid. This security deposit may be provided via bank transfer to the court’s account or through a bank guarantee; cash is not accepted. The bidding period lasts at least 30 minutes. After the bidding period expires, the court awards the contract to the highest bidder, provided the bid reaches at least half of the market value (5/10 threshold) and no creditor files a motion to deny the sale if the bid is below 70 percent of the market value (7/10 threshold).

The award decision replaces the notarized purchase agreement. Once the decision becomes final, the purchaser becomes the new owner without the need for a separate transfer of title. Real estate transfer tax is levied on the highest bid and is assessed ex officio by the tax office after the award.

Risks and Opportunities for Bidders

An auction offers the opportunity to acquire real estate below the market price. In practice, the final hammer prices are often 10 to 30 percent below market value, especially if few bidders attend the auction or the property is in poor condition.

However, this comes with significant risks: An inspection of the interior prior to the auction is not guaranteed, as the previous owner is under no obligation to cooperate. Defects in the building’s structure may therefore remain undetected. In addition, the warranty is completely waived-the purchaser takes over the property “as is.” Existing leases, rights of residence, or other encumbrances that take precedence over the auction sale may bind the purchaser and restrict the property’s utilization.

The situation is particularly risky if the court’s market value appraisal is outdated or superficial. Appraisers who were unable to conduct an interior inspection estimate the value based on an exterior inspection and market data-significant structural defects then remain undetected and become the buyer’s problem.

We therefore recommend thoroughly reviewing the market value appraisal obtained by the court and the land registry extract before the auction date, consulting an external expert for an independent assessment if possible, and, above all, carefully checking the registered rights in Sections II and III of the land registry for existing encumbrances.

All upcoming auction dates can be viewed on the portal zvg-portal.de. The respective market valuation reports and property descriptions are also available there.

Practical Tip for Nuremberg and the Metropolitan Region

In Nuremberg, the Nuremberg Local Court is responsible for foreclosure auctions. The auctions take place at Fürther Straße 110 and are announced both on zvg-portal.de and via a notice posted at the court. In the surrounding districts, the respective local courts in Fürth, Erlangen, Schwabach, and Hersbruck are responsible.

In the Nuremberg metropolitan region, we have observed that, particularly for condominiums in sought-after locations such as Maxfeld, Gleißhammer, or Erlangen-Süd, the hammer prices have moved closer to market value in recent years-because more bidders are showing up and the property is attractive even without a viewing. In less sought-after locations, auction prices remain significantly below market value.

Anyone interested in an auction should attend several sessions as an observer to get a feel for the process and the bidding dynamics before placing a bid themselves. We strongly recommend that owners facing foreclosure contact us early on: A private sale generally achieves significantly better prices and can often be arranged right up until shortly before the auction date.

Frequently Asked Questions About Real Estate Auctions

Do I need a financing commitment before the auction date?

A binding financing commitment from the bank is strongly recommended. The award of the property obligates the buyer to pay the highest bid within the deadline set by the court-usually six to eight weeks. If the buyer cannot pay, they face late payment interest currently set at 5 percentage points above the base rate and a re-auction at their expense. We advise you to fully clarify the financing, including the real estate transfer tax (3.5 percent in Bavaria), before attending the first bidding session.

Is real estate transfer tax applicable in an auction?

Yes, a purchase made through a foreclosure auction is subject to real estate transfer tax. In Bavaria, the tax rate is currently 3.5 percent of the highest bid. The tax office assesses the tax ex officio after the bid is accepted. Notary fees, however, do not apply, as the auction award decision replaces the purchase contract. Court costs (auction fee), however, are incurred and must be borne by the purchaser.

Can I still prevent an auction if I am the owner?

Until the bid is accepted, the debtor can avert the auction by fully settling the outstanding claims, including all procedural costs. A temporary suspension of the proceedings is also possible upon request if the debtor submits a payment plan and the creditor agrees-the court may suspend the proceedings up to twice for six months each time. We recommend that affected property owners in the Nuremberg region seek professional advice early on to explore alternatives such as a private sale: The result achieved in this way is almost always better than the auction proceeds.

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