Surprise costs: Why the cheapest bid isn't always the best

The hammer falls, the audience applauds, and you seem to have made a great deal. However, behind the lowest winning bid, hidden costs can linger that turn a seemingly cheap deal into an expensive adventure. In this article, we will illuminate step by step the most common unexpected costs associated with foreclosure auctions in Switzerland and show how savvy investors can factor these in or avoid them altogether before placing a bid.

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1 The difference between price and cost

The price paradox explains why the lowest bid is rarely the most economical:

Cost Block	Typical Share of the Project*	Can it be overlooked?
Hammer Price	60-70 %	No
Additional Costs & Taxes	3-5 %	Yes, transfer tax varies significantly by canton
Renovation & Modernization	15-40 %	Yes, often inadequately estimated
Financing & Bridge Loans	1-4 %	Yes, 20-day deadline forces expensive bridge loans
Risk Buffer (Unexpected Events)	5-10 %	Often omitted to remain "cheap"

*Ranges for single-family and multi-family homes, as of 2025

“The lowest winning bid is only a victory if all follow-up costs are transparently presented upfront.”

2 Hidden Renovation Costs: The "Iceberg Model"

2.1 What you never see at first glance

• Building Technology at the End of Its Life: Heating boiler 25+ years old? Replacement within 3 years is essential.
• Hazardous Materials: Asbestos, PCBs, PAHs, disposal from CHF 200 / m² affected area.
• Hidden Moisture: Basement waterproofing CHF 500-700 / m² exterior wall.
• Structure & Expansion Reserves: Lack of redundancy incurs costs for structural assessments + reinforcements.

2.2 Cost Traffic Light for Quick Estimators

Open for Reference Values

• Green (Cosmetic): 100-150 CHF / m²
• Orange (Partial Renovation): 250-450 CHF / m²
• Red (Core Renovation): 600-1,100 CHF / m²

3 Financing Costs: The Price of Time

The 20-day period between the winning bid and payment of the purchase price often requires a short-term bridge loan.

• Conditions for 2025: SARON + 1.5 % | Provision fee 0.25 %
• Snare: Prepayment penalties if the final mortgage contract is not signed in time.
• Solution: Agree on bridge loan with no-cost repayment.

4 Tax and Additional Costs: The Often Overlooked 3-5 %

• Transfer Tax: 0 % in ZH, SZ, up to 3.3 % in FR
• Notary & Land Registry: 0.3-0.6 %
• Enforcement Office Fees: 0.5-1.0 %
• Deed Creation: 0.2-0.3 %

A "cheap" bid in a high-tax canton may end up being more expensive than a moderate bid in a canton with 0 % transfer tax.

5 Strategy: How to Calculate the best Bid

1. Create a 360° Budget (Hammer price, additional costs, renovation, financing, buffer).
2. Run "Cost +15 %" Scenario, does the return remain ≥ 3 %? If not: lower the limit.
3. Apply Cost Traffic Light, minimum inspection plus mini-assessment.
4. Fully cover performance bond + liquidity before you even bid.
5. Interest Stress Test (current interest + 2 %), cash flow must remain positive.

6 Case Study: Two Bids, Two Outcomes

	Bidder A	Bidder B
Hammer Price	CHF 800,000	CHF 860,000
Additional Costs*	CHF 32,000	CHF 34,400
Renovation (Estimate)	CHF 180,000	CHF 120,000
Financing & Buffer	CHF 58,000	CHF 54,000
Total Investment	CHF 1,070,000	CHF 1,068,400

*Additional costs in the canton of Fribourg (3.3 % transfer tax).

Conclusion: Although Bidder A nominally won by being CHF 60,000 cheaper, his total budget is slightly above that of Bidder B because he had estimated an unrealistic renovation calculation. Bidder B paid more at the auction, but correctly identified that the roof and heating still have 10 years of remaining lifespan.

7 FAQ

Can I later pass unexpected costs onto the seller?

No. In foreclosure auctions, the principle of "bought as seen" applies. Warranty is excluded.

How high should my buffer be?

Experience shows 10-15 % of the total investment, and with unknown structural conditions, rather 20 %.

Is it worth paying for a full inspection before the auction?

For multi-family houses or luxury properties, yes, the additional costs of the inspection are small in relation to possible miscalculations.

8 Conclusion: The best bid is the cleverly calculated

A low winning bid is tempting, but not automatically cheap. Additional costs, renovation, financing, and buffers can dramatically alter the cost picture. Those who calculate systematically, perform stress tests, and avoid emotional exaggerations bid economically, and can win even when they are not the lowest bidder.