Most bidders think only about the bid itself. Yet the costs around it add 4 to 7 per cent to the total. This article lists every cost that arises, explains what falls away compared with an ordinary purchase, and works through concrete examples.
The main ones are property transfer tax (3.5 to 6.5 per cent depending on the federal state), the land registry fee (around 0.5 per cent) and, where you want them, your own surveyor or legal advice. Notary fees fall away entirely, because the award is made by the local court.
Property transfer tax is calculated on the winning bid. It ranges from 3.5 per cent in Bavaria and Saxony to 6.5 per cent in North Rhine-Westphalia, Brandenburg, Saarland and Schleswig-Holstein. It is the same tax you pay on an ordinary purchase.
Our article on property transfer tax at foreclosure auctions sets out the rate for every state.
After the award the new owner must be entered in the land register. The fee follows the German court fees act and the size of the winning bid. As a rule of thumb: around 0.5 per cent of the bid, with a minimum of 15 euros.
| Winning bid | Land registry fee (approx.) |
|---|---|
| 100,000 euros | approx. 500 euros |
| 200,000 euros | approx. 1,000 euros |
| 300,000 euros | approx. 1,500 euros |
| 500,000 euros | approx. 2,500 euros |
One clear advantage over an ordinary purchase: notary fees fall away entirely. In a normal sale they run at 1.0 to 1.5 per cent of the price. On a 250,000 euro property that is up to 3,750 euros you do not pay at auction.
The estate agent's commission usually falls away too, because no agent is involved in the auction.
Besides the direct transaction costs, the following can arise:
| Type of cost | Foreclosure auction | Ordinary purchase |
|---|---|---|
| Property transfer tax | 3.5 to 6.5 % | 3.5 to 6.5 % |
| Notary fees | none | 1.0 to 1.5 % |
| Land registry entry | approx. 0.5 % | approx. 0.5 % |
| Agent's commission | none, as a rule | 3.0 to 3.57 % |
| Total closing costs | approx. 4 to 7 % | approx. 8 to 12 % |
Without notary fees and agent's commission, the auction route is structurally cheaper, provided the winning bid itself sits below the market price.
A property in Hesse, where the transfer tax is 6.0 per cent, is bought for 200,000 euros:
| Item | Amount |
|---|---|
| Winning bid | 200,000 euros |
| Property transfer tax (6.0 %) | 12,000 euros |
| Land registry entry | approx. 1,000 euros |
| Notary fees | 0 euros |
| Agent's commission | 0 euros |
| Total | approx. 213,000 euros |
For comparison: buying the same property in Hesse the ordinary way would have added around 5,000 euros in notary costs and up to 7,140 euros in agent's commission.
The costs of the foreclosure proceedings are borne by the debtor, not by the buyer. The new owner pays only what relates to acquiring the property: transfer tax and the land registry fee.
Are there notary fees at a foreclosure auction? No. The award is made by the local court and has the same legal effect as a notarised purchase contract. Notary fees fall away entirely. That is one of the biggest cost advantages over an ordinary purchase.
Does the transfer tax have to be paid at once? The tax office assesses the transfer tax once the court has notified it. Payment is typically due one month after the assessment notice. Until it is paid and the clearance certificate produced, the new owner cannot be entered in the land register.
What extra costs arise if the property is let? A let property brings no extra transaction costs. You may want to budget for legal advice on the existing tenancy, though, since the buyer automatically becomes the landlord and takes over the tenancy.
Can the closing costs be financed? Yes. Many banks will finance the closing costs of an auction purchase, as long as the property's lending value allows it. Some banks require these costs to come from your own funds. Our article on financing a purchase at auction covers this.
Is there a commission or brokerage fee at auction? As a rule, no. There is no agent to earn one. Some bidders pay for advisory services, but that is a choice and not a statutory fee.
For more on running the numbers, see calculating the yield on a buy-to-let bought at auction. The whole process is set out in how a German foreclosure auction works.
This article is general information. It does not replace advice from a qualified lawyer.
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How much property transfer tax do you pay at a German foreclosure auction? Every state's rate, worked examples, and what bidders really have to budget for.
Working out the yield on a German foreclosure purchase: gross and net rental yield with the formulas and worked examples for investors.
Which banks finance German foreclosure auction properties, what conditions apply, and how to lock in your financing before the bidding starts.