Foreclosure auction

Foreclosure Auction - A foreclosure auction is a judicial enforcement proceeding in which a property is publicly auctioned off at the request of a creditor in order to satisfy outstanding debts from the proceeds. The procedure is governed by the Foreclosure and Receivership Act (ZVG) and is conducted by the competent local court.

What exactly does foreclosure mean?

A foreclosure is initiated when a debtor no longer meets their payment obligations-typically loan installments for real estate financing-and the creditor sees no other way to enforce their claim. The creditor, in most cases a bank, files an application for foreclosure with the competent local court. A prerequisite is an enforceable title, such as a land charge or mortgage, that is registered in the land registry.

Once the proceedings are ordered, a market value appraisal is prepared by an expert appointed by the court. This appraisal determines the market value of the property and forms the basis for the minimum bid at the auction. The market value takes into account location, condition, amenities, and comparable values of similar properties in the region.

The auction date is publicly announced-including on the zvg-portal.de website and via a notice posted at the local court. Any adult may bid. Bidders must deposit a security deposit of 10 percent of the appraised market value, either by bank transfer to the court’s cashier’s office or through a bank guarantee. The bidding period lasts at least 30 minutes.

The so-called 7/10 threshold is particularly important: At the first auction date, the court may refuse to award the property if the highest bid is less than 7/10 (70 percent) of the market value. If the bid is less than 5/10 (50 percent), the court must refuse to award the property. At a second auction, these limits no longer apply, meaning the property can theoretically be sold for significantly less than its market value.

The highest bidder is awarded the bid by court order and thereby becomes the so-called purchaser-the new owner of the property. The award decision replaces the notarial deed and the transfer of title. The purchaser must pay the cash bid within a specified period and takes over the property in its current condition-without any warranty claims.

Partition Auction in Cases of Community of Heirs and Divorce

In addition to the traditional foreclosure auction for debt settlement, there is the partition auction pursuant to §§ 180 ff. ZVG. It is used when co-owners of a property-such as members of a community of heirs or divorced spouses-cannot agree on a private sale or a division of the property. Any co-owner may apply for a partition auction without the need for a financial emergency or an enforceable title.

The procedure largely corresponds to that of a regular foreclosure auction. However, co-owners may bid themselves to retain the property. The proceeds are distributed according to ownership shares after deducting procedural costs. In practice, partition auctions often yield lower prices than a private sale, which is why an amicable solution is almost always more economically advantageous.

Practical Tip for Property Owners in Nuremberg and Franconia

For the Nuremberg metropolitan region, the Nuremberg Local Court serves as the enforcement court. Current auction dates are published on zvg-portal.de and regularly include properties in Nuremberg, Fürth, Erlangen, and the Nuremberg region. Market value appraisals can be viewed in advance at the Local Court.

Our network of experts recommends that owners facing financial difficulties seek early dialogue with their bank. Often, a foreclosure auction can still be averted through debt restructuring, a payment deferral, or a private sale-the price achievable in a private sale is typically 20 to 30 percent higher than the auction proceeds. For prospective buyers, however, a foreclosure auction can offer the opportunity to purchase real estate below market value-though without the opportunity for inspection and warranty typically provided in regular purchases.

Frequently Asked Questions

Can a foreclosure auction still be stopped?

Yes, the proceedings can be suspended under certain conditions. The debtor may apply for a temporary suspension if they can demonstrate a credible plan to settle the arrears within six months. Full payment of the outstanding claims, including the costs of the proceedings, also leads to the cancellation of the auction. In practice, the auction is most often averted through a timely private sale initiated with the creditor’s consent.

What costs are involved in purchasing property at a foreclosure auction?

In addition to the cash bid, the purchaser pays real estate transfer tax (3.5 percent of the hammer price in Bavaria) as well as the costs for transferring the title in the land registry. Notary fees are not required, as the auction award decision serves as the notarization. Additionally, costs may arise for existing rights that were factored into the lowest bid. No brokerage commission is charged in foreclosure auctions.

Does a tenant have to move out in the event of a foreclosure auction?

Existing lease agreements generally remain in effect after the auction-the purchaser steps into the lease agreement as the new landlord. However, the purchaser has a special right of termination: They may terminate the lease at the next possible date in compliance with statutory notice periods and must demonstrate a legitimate interest, such as personal use. Without a valid termination, the tenant remains in the apartment.

What risks are involved in purchasing at a foreclosure auction that do not arise in a private sale?

Anyone who purchases a property at a foreclosure auction takes over the property without any warranty and in its current condition-viewing is often only possible to a limited extent, as the debtor frequently denies access. While the court’s market value appraisal provides information on the estimated value, it cannot fully account for hidden defects. Additional risks: If certain rights are included in the minimum bid-such as residential rights or usufruct rights listed in Section II of the land register-these rights remain in effect after the auction is awarded and continue to encumber the property. Arrears from condominium maintenance fees may also be transferred to the purchaser after the auction is awarded. In the Nuremberg metropolitan region, we recommend that prospective buyers review the market value appraisal and auction documents in full at the local court in advance, consult a lawyer with experience in public auctions, and, if possible, conduct an on-site inspection to at least roughly assess the property’s condition. An experienced real estate advisor can help weigh the opportunities and risks realistically.

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