Guide · Real Estate Agents
Property valuation: how value is determined
Sales comparison, income, cost approach – which method suits which property.
Key points
- Define purpose and valuation date first
- Use a method suited to the property and available evidence
- Market value, asking price and mortgage lending value differ
- Request data sources and explained adjustments
Market value
Market value is the price achievable on the valuation date in ordinary business dealings. The rules are set out in the German Property Valuation Ordinance.
Three methods
The sales comparison approach uses prices of similar properties, the income approach sustainable rents, the cost approach construction costs less depreciation.
Market appraisal or expert report?
For a sale, a sound market appraisal is often enough. For court, inheritance or tax purposes, a report by a certified expert is usually advisable.
Choose the right level of valuation
A documented market appraisal may be enough for deciding an asking price. In inheritance, divorce, litigation or tax matters, a formal report may be needed. Establish who must rely on the result, the valuation date and any required expert qualification before commissioning the work.
The three recognised approaches
The comparison approach uses suitable completed sales. The income approach combines land value with sustainable net income and is commonly used for investment property. The cost approach considers land and depreciated building costs with a market adjustment. More than one approach may be used as a reasonableness check.
Property-specific value drivers
Micro-location, lawful use, floor area, condition, energy performance, tenancy, land-register rights and deferred maintenance all matter. For condominiums, the state of common property, reserve and planned works can materially affect value. Interior finishes cannot automatically offset structural or legal disadvantages.
How to test the result
Ask for the evidence date, source and true comparability of reference properties. Adjustments should be explained. Online estimates can provide an initial range but usually cannot see interior condition or every legal restriction. German mortgage lenders may also calculate a more conservative lending value for credit-risk purposes.
Checklist
- Purpose and valuation date defined
- Areas and lawful use documented
- Alterations and condition evidenced
- Comparables and adjustments explained
- Tenancy and registered rights included
Common mistakes
- Using listing prices as completed-sale evidence
- Copying unverified floor areas
- Treating an automated estimate as a formal valuation
Frequently asked questions
Is an agent appraisal a formal market-value report?
Not automatically. Its scope usually serves marketing rather than court or tax evidence.
Which method is best?
That depends on property type, purpose and evidence. The German valuation ordinance sets the recognised framework.
Sources and further reading
Official and specialist sources for checking the current rules. Links last checked on the update date shown above.
General editorial information, not individual legal, tax or financial advice. Rules and programmes can change; verify the current position for your case.