Purchase price, additional costs, renovation: How to calculate your budget correctly

A foreclosure auction may attract buyers with prices significantly below market value, but the hammer price alone is only half the truth. Those who calculate wisely take into account all costs: from security deposits to cantonal taxes and future renovations. This guide shows you step by step how to realistically plan your budget while still maintaining enough buffer for positive cash flow.

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1 Understanding Appraised Value, Minimum Bid & Hammer Price

• Appraised Value = official market value, basis for the security deposit.
• Minimum Bid = often 80% of the appraised value (varies by canton).
• Hammer Price = actual purchase price, where you save compared to the market.

On the auction day, you must deposit a security deposit of 10% of the appraised value (bank transfer or bank guarantee) before placing your first bid.

2 Additional Costs: The Often Underestimated 3-5%

2.1 Overview & Typical Ranges

Cost Block	Range	Notes
Transfer Tax	0 - 3.3%	0% in ZH, SZ, ZG, UR, GL, SH …
Notary & Land Registry	0.1 - 0.5%	Usually shared 50/50, buyer pays land registry.
Creation of Mortgage Document	0.2 - 0.3%	Only on the mortgage amount, not on the purchase price.
Debt Collection Office Fees	0.5 - 1.0%	Fixed according to cantonal rates, including publication & surcharge.

When adding up all items, the additional costs typically amount to 3-5% of the hammer price.

3 Renovation: From "Hidden Champion" to Cost Drain

3.1 Cost Key per m²

• Light Refreshing (Painting, Flooring): 100-150 CHF / m²
• Partial Renovation (Kitchen, Bathroom): 250-500 CHF / m²
• Total Renovation: 600-1,200 CHF / m²

Price ranges according to industry portals such as Houzy and Comparis.

3.2 Rule of Thumb, 15% Buffer

Plan for an additional 15% unforeseen costs: asbestos, piping, heritage protection. Recently auctioned properties often have not been maintained for a long time.

4 How Much Equity Do You Really Need?

1. 10% of appraised value as a security deposit (readily available).
2. Minimum 20% of own funds according to FINMA rules (of which 10% is hard cash).
3. Additional costs + renovation buffer not mortgageable.

If the hammer price and appraised value are far apart, you can reduce your equity requirements: the bank usually finances the higher appraised value, cleverly leveraging your return.

5 Sample Calculation: Budget in Six Lines

Appraised Value (official)             CHF 1'000'000
Hammer Price (Your Bid)                CHF   880'000
Additional Costs (3.5%)                CHF    30'800
Security Deposit (10% AV)              CHF   100'000
Renovation Fund (250 CHF/m²)           CHF   125'000
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Total Liquidity Requirement               CHF 1'135'800
Equity (20% HP + AC + Reno)             CHF   247'160
Mortgage (after Renovation)             CHF   888'640

6 Budget Checklist for Bidders

1. Check appraised value & report before the auction.
2. Ensure security deposit & interim financing in writing with the bank.
3. Document cantonal taxes & fees in tabular format.
4. Assess renovation needs with a professional and obtain an offer.
5. Add a 15% reserve to the renovation sum.
6. Plan additional costs in cash, not from pension funds.
7. Finalize mortgage immediately after the award & check cash flow start.

7 FAQ

Can I cover the security deposit with a Lombard loan?

Yes, many banks accept securities as collateral. Important: the deposit value minus a 30% risk discount must exceed the 10% coverage.

Does the renovation reserve count as equity?

Not necessarily. If you finance it with equity, it improves your affordability, bank financing is possible, but falls into the second mortgage rank.

How do I prevent budget surprises?

Have a detailed assessment (building diagnostics, thermography) conducted, or budget a flat 20% markup if no inspection is possible.

8 Conclusion: With a Clean Budget to Stress-Free Bidding

Foreclosure auctions offer price advantages, but only if you realistically plan for all additional costs and renovation expenses. With 3-5% additional costs, a 10% security deposit, and a tested renovation estimate, you can safely unlock hidden potential and build wealth over the long term without costly surprises.