Foreclosure

What is a foreclosure?

A foreclosure is a judicial procedure in which a property is sold at public auction. The goal is to use the proceeds to settle outstanding debts owed by a debtor. In other words: the property is not sold voluntarily, but because there is an outstanding claim that could not be settled in any other way.

The auction is overseen by the court. Interested parties can place bids. The highest bidder receives the award and becomes the new owner.

Foreclosures typically occur in cases of payment defaults or mortgage debt. For creditors, this procedure is a way to recover their money—without having to wait for a voluntary payment.

How does a foreclosure differ from enforcement proceedings in general?

Foreclosure is a specific form of enforcement proceedings. While enforcement proceedings cover a wide range of measures to recover outstanding debts, foreclosure applies only to real estate.

In standard enforcement proceedings, for example, movable assets can be seized, or bank accounts frozen. Foreclosure, on the other hand, deals solely with immovable property—such as houses, condominiums, or plots of land.

Another difference lies in the procedure itself: foreclosures are not carried out by a bailiff, but by the responsible enforcement court. The legal process also differs and is governed by the Forced Sale and Receivership Act (ZVG).

In short: enforcement proceedings are the broader category—foreclosure is a specific measure within that category, focused exclusively on real estate.

What types of assets are sold in a foreclosure?

A foreclosure always involves immovable property. That means various types of real estate are auctioned. These include, for example:

• Plots of land (developed or undeveloped)

• Condominiums

• Single-family and multi-family homes

• Commercial properties

• Heritable building rights

Movable items like furniture, vehicles, or electronics are not subject to foreclosure. These would, if at all, be handled through other enforcement measures, such as seizure or public auction by a bailiff.

The property is auctioned publicly as part of the procedure so that the proceeds can be used to repay the outstanding debt (for example, a mortgage).

Who can request a foreclosure?

A foreclosure can be requested by a creditor if there is an outstanding debt and an enforceable title is available. This is an official document confirming that the claim may legally be enforced.

Typical creditors include:

• Banks, if a mortgage has not been repaid

• Companies with unpaid invoices

• Landlords or property managers in the event of payment arrears

• Private individuals with recognized claims

In some cases—such as with banks—there is an alternative way to initiate a foreclosure: if a mortgage or land charge has already been entered into the land register, no prior court ruling is needed. The bank can apply for the auction directly—even without a title. The legal basis for this is the Forced Sale and Receivership Act (ZVG), in particular § 15 ZVG.

How is a foreclosure initiated?

The process begins with an application to the competent enforcement court. This means the district court responsible for the area in which the property is located. The application can be based on either an enforceable title or a registered security in the land register (e.g., a land charge).

Depending on the case, the application must include the following documents:

• Written application for foreclosure

• Copy of the enforceable title or land register extract

• Supporting documents related to the claim

• Information about the property (e.g., address, land register reference)

Once the court has reviewed and accepted the application, the judicial process begins. The property is then marked with a notice of foreclosure in the land register. This makes it publicly visible that the property is due to be auctioned.

Who is responsible for conducting the process?

The entire foreclosure procedure is managed by the enforcement court (Vollstreckungsgericht). This is a specialized department of the district court responsible for the area where the property is located.

The enforcement court plays a central role in all stages of the foreclosure process. Its tasks include:

• Reviewing and approving the application: The court checks whether all necessary documents are submitted and whether the application meets legal requirements. Only if everything is in order will the process be initiated.

• Issuing the foreclosure order: Once the application is approved, the court issues an official order to begin the foreclosure process. This includes entering a notice of foreclosure in the land register, making the impending auction publicly known.

• Commissioning the market value appraisal: The court appoints an expert to assess the property's value. The resulting appraisal is then published for potential bidders to review.

• Setting and announcing the auction date: The court determines the date for the foreclosure auction and makes it publicly available through official channels such as the zvg-portal.de and notices posted at the courthouse.

• Conducting the auction: On the day of the auction, the court oversees the entire bidding process. It ensures that all formalities are observed and that bids are legally valid.

• Issuing the award decision: Once the highest bid is accepted, the court issues a legally binding award decision, transferring ownership to the successful bidder.

• Ensuring compliance with legal requirements: Throughout the entire process, the court monitors adherence to relevant laws and regulations, including the Forced Sale and Receivership Act (ZVG).

• Documenting and archiving the process: The court is responsible for properly documenting all steps of the foreclosure, ensuring transparency and legal certainty for all parties involved.

The enforcement court acts as a neutral authority, ensuring that the foreclosure process is carried out lawfully and transparently. Its involvement is essential to protect the rights of all parties, including creditors, debtors, and potential buyers.

What is the basic process of a foreclosure?

Once the procedure has been initiated, it follows a clearly defined sequence. The goal is to auction the property publicly and use the proceeds to settle the debt.

Key steps at a glance:

1. Determining the market value

   A court-appointed expert determines the value of the property. This estimated market value serves as guidance for prospective bidders.

2. Announcing the auction date

   The court publicly announces the date—usually online via zvg-portal.de and via notices at the courthouse. The expert valuation is also made available for viewing.

3. Auction date (bidding session)

   On the scheduled day, interested parties can submit bids. The court conducts the auction and checks that all legal requirements are met.

4. Award

   Once the bidding period ends, the highest bidder is awarded the property. The court makes the final decision once all legal conditions are satisfied.

Ownership is transferred only after the award is granted—this marks the end of the auction process. Further steps, such as distributing the proceeds, take place in a separate stage.

What is published or documented during the process?

Several details are made public during a foreclosure. This ensures transparency and allows potential bidders to gather information in advance.

The following are usually published:

• The auction date, announced via the online portal zvg-portal.de or through notices at the district court

• An exposé of the property, including basic information such as location, size, use, and notable features

• A market valuation report, prepared by a court-appointed expert to estimate the property's value

• The award decision, issued by the court after the auction and documenting the new owner of the property

These documents are important for all parties involved—especially for interested bidders, but also for creditors and debtors.

How can foreclosure be prevented?

Foreclosure is a drastic measure that can cause significant financial and personal disadvantages for the property owner. But it doesn’t have to go that far: Acting quickly can stop the process and prevent the loss of the property.

The fastest and most reliable way to prevent foreclosure is to pay off the debt in full. Once the claim is settled, the process is terminated. Any delay increases the risk that the sale cannot be stopped.

Other options:

• Installment agreements: Many creditors accept installment payments. The sooner you act, the better your chances of reaching an agreement.

• Settlement negotiations: Settlements are possible but become increasingly difficult as the auction date approaches.

• Request for temporary suspension: A short-term solution with an uncertain outcome, usually only suitable for delaying the process.

• Bankruptcy proceedings: A last resort that often results in the loss of the property.

Paying off the debt is always the most effective option. Creditors are usually willing to negotiate if they see that the debtor is making a serious effort to pay. Reaching out to the creditor directly is the most important step to end the process and prevent foreclosure.