Anyone who wants to bid at a German foreclosure auction must provide a bid deposit first. Without it the court may not accept a bid. The amount, the accepted means of payment and the consequences of failing to pay are set out in § 67 ZVG and matter to every bidder.
The bid deposit is a mandatory security that bidders must prove before the auction, or at the latest when they make their first bid. It comes to 10 per cent of the appraised market value that the court has set for the property. The court does not accept bids from anyone who has not proved the deposit.
The deposit is calculated from the appraised market value alone, not from the actual winning bid. So even if a property later sells for 50 per cent of that value, the deposit stays at 10 per cent of the full appraised value.
| Appraised market value | Bid deposit (10 %) |
|---|---|
| 100,000 euros | 10,000 euros |
| 200,000 euros | 20,000 euros |
| 350,000 euros | 35,000 euros |
| 500,000 euros | 50,000 euros |
You will find the appraised market value in the valuation report the court commissioned. Our article on reading a valuation report explains how to work through one.
The law accepts the following for the deposit:
Normally not accepted:
The deposit must be proved at the latest when you make your first bid. In practice it is better to hand it over when the hearing opens. The court checks it and confirms that you may bid.
Where the deposit ends up depends on whether you win and whether you then pay:
The deposit comes back in full. The court returns or transfers it as soon as the award has been made to the highest bidder.
The deposit is set off against the winning bid. You then pay only the difference between your bid and the deposit already provided.
The court keeps the deposit. It serves as damages for the creditors. On top of that a new auction date must be set. The defaulting bidder is liable for the shortfall if the property fetches a lower price at the second auction.
If this is your first foreclosure auction, keep the following in mind:
Can I attend without a deposit? Yes. The auction is a public hearing. Anyone may watch without a deposit, they simply cannot bid. It is a good way to get to know the procedure before bidding yourself.
What happens if I forget the deposit? The court will not accept any bid from you. You may watch, but not take part. There is no exception and no grace period.
Can I borrow the deposit? The deposit must come from your own funds or from a bank guarantee. It cannot be covered by a loan that is only paid out after the auction. If you plan to use borrowed money, settle this with your bank beforehand. Our article on financing a purchase at auction goes into it.
Can the deposit be higher or lower than 10 per cent? No. The amount is fixed by law at 10 per cent of the appraised market value (§ 67 ZVG). The court can neither raise nor lower it.
For the exact course of an auction hearing, see how a German foreclosure auction works. For the tactics of bidding, see bidding successfully at a foreclosure auction.
This article is general information. It does not replace advice from a qualified lawyer.
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