GuideProcess

Compulsory auctions for beginners: the full process in 8 steps

By Pascal Szorath··5 min read·

Bidding at a compulsory auction for the first time? This guide walks you step by step through everything – from finding a property to financing, the security deposit and the award.

Buying a property below market value sounds tempting. The catch: at a compulsory auction (Zwangsversteigerung) you buy without warranty, the award is immediately binding, and no one checks at the hearing whether you can pay. Those who know the process avoid the classic beginner mistakes. This guide takes you through the entire procedure in 8 steps – and links to the matching in-depth article for every detail.

What is a compulsory auction?

If an owner can no longer service their debts (e.g. the mortgage on the property), a creditor can have the property auctioned off through the local court; the proceeds go to the creditors. For you as a bidder, this is a chance to buy below market value – but by its own rules, the ZVG (the German compulsory auction act).

Step 1: Understand what you are getting into

Three things distinguish a compulsory auction from a normal purchase:

  • No withdrawal: Once the award is made, the property is yours – immediately and bindingly.
  • No warranty: Defects are your risk (§ 56 ZVG).
  • No notary, no estate agent: These costs disappear – but others are added (see below).

Step 2: Find a property

Auctions are officially announced on zvg-portal.de. You will find them more clearly laid out – with a map, photos and an AI analysis of the appraisal – in our property overview.

Particularly helpful for the shortlist are the risk classes: they show which properties already contain noteworthy points in the appraisal and what data basis underpins them.

Step 3: Inspect the property thoroughly

The most important step – and the one where most beginners lose money. You usually cannot view the property from inside and you buy without warranty. Your homework: read the market value appraisal, check the land register for rights that remain in place, and find out whether the property is occupied. How to do that is in the guide Inspecting a property before bidding.

Step 4: Sort out your budget and financing

No one checks your creditworthiness at the hearing – your bank sets your limit. Clarify before the hearing up to what amount it will finance exactly this property, and budget for the additional costs. Details: Financing a compulsory auction.

Step 5: Provide the security deposit

To take part in the bidding, you usually have to lodge 10% of the market value as security – no cash and before the hearing (§ 68 ZVG). If you do not win, you get it back. Here is how it works: Security deposit.

Step 6: Bidding authorisation – if you do not attend yourself

If someone bids for you (or you for your spouse), that person needs a publicly certified power of attorney (§ 71 ZVG) – otherwise the bid is rejected. More on this: Bidding authorisation.

Step 7: Bidding at the hearing

The judicial officer (Rechtspfleger) calls the case, names the lowest admissible bid, and then the bidding period of at least 30 minutes begins (§ 73 ZVG). Whether your highest bid secures the award depends, at the first hearing, on the value thresholds. How the hearing unfolds: The auction hearing step by step; what the five-tenths (50%) and seven-tenths (70%) thresholds are all about is covered in its own guide.

Step 8: After the award

You are an owner immediately. Now the cash bid falls due (in 4–8 weeks, plus 4% interest), along with real estate transfer tax as well as court and land register costs. Tenants stay, some rights remain in force. What all lies ahead of you: After the award.

The key figures at a glance

  • 10% of the market value – security deposit, in advance
  • 30 minutes – minimum bidding period
  • 5/10 & 7/10 – award value thresholds at the first hearing
  • 4–8 weeks – until the cash bid falls due, 4% interest from the award
  • 3.5%–6.5% – real estate transfer tax, depending on federal state

The 5 most common beginner mistakes

  1. Bidding blind – without having read the appraisal and the land register.
  2. Forgetting the additional costs – real estate transfer tax, renovation, outstanding service charges not budgeted for.
  3. Sorting out financing only after the hearing – too late, the award is binding.
  4. Security deposit too late or in cash – then you are not allowed to bid.
  5. Bidding above your own limit – anyone who cannot pay loses the security and is liable for the shortfall.

Note: General orientation, not legal or financing advice. The official notice of the competent local court is the authoritative source.

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