Property transfer tax at German foreclosure auctions: every state compared

Property transfer tax applies at a foreclosure auction exactly as it does in an ordinary purchase. Leave it out of your bid and your arithmetic is wrong, and you end up paying considerably more than planned. This article sets out the rates, the basis of assessment and the main differences from a normal purchase.

What is property transfer tax?

Property transfer tax, the Grunderwerbsteuer, is a tax on acquiring land and buildings in Germany, governed by the GrEStG. At a foreclosure auction the liability arises when the local court's award becomes final. The taxpayer is the successful bidder.

The key difference from an ordinary purchase: at auction the tax is assessed on the winning bid, not on the appraised value in the report. So if the bid comes in below the value in the report, you save on the price and on the tax.

Rates by federal state in 2026

Property transfer tax is set by the states. Since 2006 each state has decided its own rate. The range runs from 3.5 per cent in Bavaria to 6.5 per cent in several states.

What that means: a buyer in Bavaria pays exactly 7,000 euros of tax on a bid of 200,000 euros. The same purchase in North Rhine-Westphalia costs 13,000 euros. The gap between the cheapest and the most expensive state is close to double.

How is the tax calculated?

The basis is the winning bid

At a foreclosure auction the basis of assessment is the winning bid (§ 9 (2) no. 4 GrEStG). The bid includes:

• The bid itself, made in the hearing room
• Debts taken over, meaning surviving land charges where the buyer assumes them
• Any other obligations the buyer takes on

Worked example

A property is valued at 300,000 euros in the report. The highest bidder wins the award at 210,000 euros. The property is in North Rhine-Westphalia, where the rate is 6.5 per cent.

In Bavaria, at 3.5 per cent, the tax would be only 7,350 euros and the total around 219,450 euros.

When does the liability arise?

The tax arises with the award, at the moment the court officer announces the decision. The tax office assesses it on the basis of the auction record. The assessment notice usually arrives within a few weeks of the hearing.

Important: the new owner is only entered in the land register once the tax office has issued its clearance certificate. So if you pay the tax late, your entry as owner is delayed.

Are there exemptions?

Exemptions under the GrEStG

The act contains a few exceptions, though they rarely apply at auction:

Family members (§ 3 GrEStG): acquisitions between spouses, registered partners, parents and children, and between siblings under certain conditions are exempt. At auction that matters where a family member buys a relative's property.

Charitable organisations: certain charitable buyers can be exempt.

For private buyers: in practice a normal auction purchase carries no exemption. The tax is payable in full.

No advantage over an ordinary purchase

Contrary to what is sometimes claimed, a foreclosure auction carries no tax discount of its own. The only advantage is indirect: if the bid is below market value, the basis of assessment falls and the tax bill with it.

Compared with an ordinary purchase

An ordinary purchase carries no court fees but does carry notary fees. An auction saves the notary cost and usually the agent's commission. On balance, closing costs at auction run at 5 to 9 per cent of the bid, against 8 to 15 per cent for an ordinary purchase, depending on the state and the commission agreed.

Building the tax into your bid

Doing the arithmetic the right way round

Many bidders make the mistake of capping their budget at the bid and working out the costs afterwards. The right approach runs the other way:

1. Set your total budget, including closing costs and a renovation reserve
2. Subtract the transfer tax, the land registry fee and the court fees, that is 5 to 9 per cent depending on the state
3. What is left is your maximum bid

Worked through:

Total budget: 250,000 euros Closing costs in North Rhine-Westphalia, around 8.5 %: 21,250 euros Maximum bid: 228,750 euros

Skip that step, bid 250,000 euros, and after the award you have around 21,250 euros less for renovation or reserve.

Frequently asked questions about property transfer tax

Does the tax apply if the property is practically worthless and I pay almost nothing? Yes. The tax arises even on a token bid, as long as an award is made. Note, though, that the court will not make the award if the bid falls below 50 per cent of the appraised value.

Can I deduct the tax as an expense? When buying an investment property, the transfer tax counts as an incidental acquisition cost and raises the basis for depreciation. It cannot be deducted outright in the year it is paid; it is written off over the useful life.

How quickly must I pay? The assessment notice sets a deadline, usually four weeks. Only once you have paid does the tax office issue the clearance certificate needed for the land register entry.

What if the award is later refused? If the award is finally refused, for instance because of a procedural error, the tax liability falls away retrospectively. Anything already paid is refunded.

---

For more on planning the costs, see bidding successfully at a foreclosure auction and financing a purchase at auction.

This article is general information. It does not replace advice from a tax adviser.