Bargain with risks
Building interest rates have almost quadrupled in the past two years. This can pose problems for owners who need to refinance a current mortgage or service a loan with a variable interest rate in this interest rate environment. The higher financial burden can tear an unplanned hole in the household budget, which in the worst case scenario leads to those affected having to sell their property or even to a foreclosure auction. Building interest rates have almost quadrupled in the past two years. This can pose problems for owners who need to refinance a current mortgage or service a loan with a variable interest rate in this interest rate environment. The higher financial burden can tear an unplanned hole in the household budget, which in the worst case scenario leads to those affected having to sell their property or even to a foreclosure auction. One man’s suffering is another man’s joy. In Germany, tens of thousands of properties are foreclosed on every year – often below their market value. Even if prospective buyers can find one or two bargains here, there are a few things you should consider before embarking on this adventure to avoid unpleasant surprises.
Understand the process
As a rule, the house is auctioned by the court due to the owner’s arrears. The highest bidder will win the auction. Outstanding debts are usually paid from auction proceeds. However, it can also happen that some legacy financial burdens such as land charges and mortgages have to be taken over by the new owner. However, such conditions will be bindingly announced at the auction date.
Before the foreclosure auction, you should gather as much information about the property as possible. This includes, for example, checking the land register entries for possible additional encumbrances or third-party rights. In addition, if possible, you should inspect the property in advance and note the condition and any defects. However, an interior inspection is often not possible.
Determine market value
In order to determine the maximum offer that you are willing to make at the auction, you should determine the value of the property and also take possible risks into account. For example, without an interior inspection, there is a risk that the property will be in poor condition. It is therefore advisable to seek professional advice in order to assess possible risks – be they of a structural or legal nature.
As a rule, you have to deposit a security deposit with the responsible court in order to take part in a foreclosure auction. This usually represents a certain percentage of the minimum bid and is usually communicated when the appointment is announced or can be requested from the responsible local court. The remaining balance must be paid within a specified period of time.
After the award
After a successful bid, you become the owner of the property and the purchase price must be paid. The advantage of foreclosure auctions is that some of the costs associated with a normal property purchase are eliminated. This means that there are no fees to pay for a broker, notary or for the land register entry. To do this, court costs must be paid for the surcharge and the transfer in accordance with the fee table in Section 34 of the Court Costs Act. In addition, interest of 4 percent accrues for the period between the auction date and the payment of the bid. Overall, however, the additional purchase costs are generally lower than with a conventional property purchase.
Source: Haus & Grund