Avoiding bad purchases: What you should pay particular attention to

A bid below market value sounds tempting, but dream deals can quickly turn into nightmares when you end up acquiring duds. This guide shows you how to systematically eliminate bad purchases: from the initial property analysis to the final bid. All tips are proven in practice and equally suitable for beginners and professionals looking to fine-tune their risk management.

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1 The "6 + 1" Checkpoints Against Unpleasant Surprises

1. Legal Situation: Land registry, liabilities, easements
2. Building Structure: Expert reports & inspections
3. Financing: Lending, collateral, liquidity
4. Market: Location, microdata, rental price index
5. Taxes: Property transfer tax, capital gains tax, imputed rental value
6. Exit Options: Sale, rental, repurposing
7. + 1 "People Risk"

The + 1 component ("People Risk") reminds us that dishonest debtors, sluggish offices, or overly motivated competitors can derail any plan. Build in buffers!

2 Law & Liabilities: The Probably Most Important Filter

2.1 Checklist for Liability Sheet

Entry	Risk	Deal-Breaker?
Right of way or proximity	Construction reserve shrinks	Possible, if yield > 8 %
Usufruct	Third party uses or occupies property	Yes, if lifetime < 80 years.
Building right in 1st rank	Bank lends lower (≤ 60 %)	Only with a lot of equity
Heritage protection	Renovation costly, permits lengthy	No, if subsidy chance > 30 %

2.2 Practical Hack: Three Questions for the Debt Collection Office

1. “Which liabilities definitively remain?”
2. “Are there any ongoing appeals or court proceedings?”
3. “Is there a usage permit (Building Approval) in place?”

3 Building Structure: What the Obvious Often Hides

3.1 Minimal On-Site Toolkit

• Moisture meter (< CHF 80)
• Endoscope camera for cavities
• CO₂ laser thermometer, insulation check

3.2 Renovation Thumb Rules (Residential Construction)

• < 15 years → usually just refreshing ≈ 120 CHF/m²
• 15 - 35 years → partial renovation ≈ 350 CHF/m²
• > 35 years → core renovation ≈ 750 CHF/m²

Only add the sums, then make your offer. Those who reverse this will find themselves in negative territory.

4 Financial Pitfalls & How to Avoid Them

4.1 Liquidity Trap “20-Day Deadline”

There are often only 20 calendar days between the bid and the payment deadline. Plan for a bridging loan + 10 % reserve.

4.2 Interest Stress Test

Current Interest       1.75 %
Stress Interest       3.75 %
Cashflow             ≥ 0  ?  ✔ Buy: ✖ Hands off

4.3 Tax Turbo vs. Tax Brake

Property transfer taxes decrease with the hammer price, while capital gains tax increases because the purchase price is low. Plan for a holding period ≥ 5 years to slow down progression.

5 Market Reality Check & Exit Strategies

“You earn on the purchase, it is only realized upon sale or in rent.”

• Plan A Renting: Gross yield ≥ 5.5 %
• Plan B Trading/Flipping: Spread ≥ 15 % after costs + renovation
• Plan C Own Use: Cashflow δ = 0 acceptable, but value increase potential ≥ 10 % in 5 years.

6 “People Risk,” an Underrated Source of Error

6.1 Debtors Who Don't Move Out

In the case of single-family homes, always check the eviction period. Include a 90-day vacancy in your financial planning in the worst case.

6.2 Bidding Drama & Ring Formation

Agreements (“rings”) are illegal. Watch for conspicuous alternating bids between the same persons. If there are suspicions → write to the office immediately after the bid (deadline 10 days).

7 Best-of-DON’Ts, Learn from Others' Mistakes

1. Blind Bidding: “Everyone is getting in, it must be good.” No.
2. Sweetening the Deal: “Renovation? You can do it yourself for 50 CHF/m².”
3. Single Exit: No Plan B for selling or renting.
4. Interest Neglect: 1 percentage point more kills the yield.
5. No Insurance: Title or legal protection often saves five-figure amounts.

8 60-Second Checklist Before Bidding

• Liability sheet → green light
• Expert report + self-assessment ± 10 %
• Bridging financing signed
• Renovation budget + 15 % buffer
• Target price ≤ estimate × 0.75
• Interest stress test passed

9 FAQ

Can I withdraw from the purchase after the bid?

Practically not. Only in cases of serious procedural errors within 10 days (complaint per Art. 134 ff. SchKG), so it's better to check in advance!

Does a household or building insurance help before taking possession?

Yes, many insurers offer coverage from the bid. This protects against fire or natural events between the bid and registration.

How do I assess hidden liabilities?

Check the cadastre (contaminated sites / contaminated site database), analyze soil class, proximity to gas stations / service garages and budget at least CHF 50,000 reserve when there are suspicions.

10 Conclusion: Bad Purchases? Not With This Radar!

Foreclosures only become risky when you ignore risks. Those who keep an eye on the legal situation, technology, finances, and human factors will quickly distinguish bargains from junk. Use the “6 + 1” checkpoints, calculate conservatively, and always have a Plan B ready, and every auction will become an opportunity to build wealth without missteps.