“We don’t recommend to look into foreclosure as a source of investment properties.”
Upfront and straight forward, we don’t recommend for anyone to look into foreclosure as a source for property investments.
The reasons why you should stay away from foreclosures are many, just to name a few:
Financing is not possible
Financing, at least the traditional bank financing with a mortgage will not be available. This is due to the structure of the process in court, with the hammer the buyer becomes the new owner in the land register, no possibility to file for a mortgage. Conclusion, no bank will borrow as there will be a gap where they are not secured and you have full access and ownership.
Property inspection is not available
The bidder will not be able to check the property on auction from inside. He has to rely solely on one source of information, an appraisal done by a court-appointed appraiser. Typically this report and the valuation is 12-24 month old. The property most likely is in a much worst condition on the day of the auction.
High demand leads to high prices
Demand is either very high, the courthouse is full of bidders and those bidders typically push it higher than market price, or demand is very low, because of a reason. Both is not what you want as an investor.
Channcelation of the auction is always possible
Even if you did all your homework properly and you are ready to bid in the auction, it happens that at the day of the auction or even just minutes before, the auction will be channelled because the owner of the property (or the bank) agreed to a deal with somebody.
Legal knowledge is mandatory
If you don’t have the legal knowledge yourself than it’s too expensive to buy that knowledge from a lawyer or another knowledgeable person. If you don’t speak German yourself it’s a mess.
Bottom line foreclosure is something even we as locals, with perfect language capabilities and market knowledge stay away from.
The official website for German foreclosure
If this doesn’t hold you back from researching property foreclosures, here is the only official site that publishes foreclosure, all other websites are just a copy of this original site:
Non-foreclosure property auctions
All the above counts for real (forced) foreclosures, there are however normal property auctions which we highly recommend.
Deutsche Grundstücksauktionen AG
The biggest German Property auction house is DGA Deutsche Grundstücksauktionen AG, a listed company here on the German stock market.
Once you get registered with DGA AG you will receive all (print) catalogs from all their subsidies.
The second biggest German property auction house is Karhausen AG.
About the author
I am Alexander Korte and together with my wife Swetlana and my partner Gianmaria Condulmari I run a property developer and asset management company in Berlin (Germany).
I started my first property business in 1997 with a brokerage company. The company is still in operations and we advise a handpicked crowd of investors, and as you could guess we are most and above all property investors ourself.