Please note, this article is written with a focus toward the German market, although very similar rules apply everywhere.

Market value: macro & micro location

The market value assessment refers to the macro location (city/region) and the micro location (immediate surroundings of the property) of the property, its section, size and any existing land charge entries that could reduce the value.

According to the German Building Code (BauGB), the market value is not a permanently fixed value, but refers to the reference date stated in the appraisal. It is possible that the market value may change significantly within a certain period of time.

Appraisal procedure: Definition of the procedures

The type of real estate determines the valuation method used for determining the market value. There are three standardized valuation methods for determining the market value of real estate: the comparative value method, the asset value method and the income value method. As a rule, at least two of these methods are calculated simultaneously.

1. 1. Comparison value procedure
   2. Income approach
   3. Asset value method
   4. Residual procedure
   5. Mortgage lending value calculation

Comparison value method

The comparative value method is often used for undeveloped land and condominiums. The land value is determined by comparing the purchase prices of similar properties.

• Comparison value procedure

Yield value method

The income capitalization approach is used for the valuation of leased properties, land and companies. The income generated is capitalized.

• Income value method

Value method

For single-family houses and condominiums, the real value is determined by means of the real value method. The wear and tear value is subtracted from the new construction costs.

• Value method

Residual procedure

The residual method is not standardized – here the maximum amount that can be invested is determined. The costs to be borne by the investor are deducted from the property sales value.

Loan value determination

The determination of the mortgage lending value is also not standardized. Banks or the banking industry generally determine the mortgage lending value of the property in order to minimize the risk when granting loans. The valuation takes into account the probability that the property can be sold safely at the mortgage lending value over a longer period of time. In most cases, 70 to 80 percent of the market value to be achieved is made available as a credit line.

Costs of an evaluation

For the calculation, a rough evaluation is first made. The price for the final valuation is therefore, in most cases, based on the estimated value of the property to be valued.

If the value of the property is below a limit of 150,000 Euros, you can expect approximate costs of 1,500 Euros. For luxury real estate or multi-family houses with a real estate value of more than 1 million, the estimated fee rises to 3,000 Euro.

• • Below 150,000 Euro value, approx. 1,500 Euro
  • Over 1,000,000 Euro value, about 3,000 Euro

Source: Federal Association of Experts

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Appraisals: Specifications, experts and market

Unless legal regulations require the appointment of an expert, you will receive a realistic valuation of your property in the regional and national market with a real estate appraisal. We provide timely and accurate valuations of land, residential and commercial properties.

However, if the valuation is to be presented in court, for example in the case of a divorce, experts must be consulted for a fee. The residential or rental property is inspected on site. As a rule, both a written and a digital copy of the appraisal are issued.

This officially recognised market value appraisal has its price. In principle, the appraisal fee depends on the expected market value of the property as well as on the effort required to prepare the appraisal.

Fees for architects and engineers (HOAI)

However, expert fees are still often based on the Ordinance on Fees for Architects and Engineers (HOAI) of 2002, which has no longer been binding since 2009, but since then there has been no fixed regulation for expert opinions and valuations.

Fee in principle freely negotiable

This means that you are basically free to negotiate the fee with the real estate appraiser. Before you commission an appraiser, you should obtain several offers. We will be happy to assist you in selecting and commissioning an appraiser from your region.

In accordance with a guideline of the Bundesverband Sachverständiger (B.V.S. Sachverständiger), the fees for appraisal services are determined on the basis of the property value. Other special features of the property, such as residential and heritable building rights and rights of way, are added.

Appraisal fees: Property value sets the price

If the property is valued at 300,000 Euros, the appraiser’s fee according to the guidelines of the B.V.S. Sachverständige amounts to 1,800 Euros. Since a right of way was additionally appraised, a surcharge of 20 percent = 360 euros can be invoiced. The costs for the expert thus amount to a total of 2,160 euros.

Offsetting with broker commission

If you work with experts when selling the apartment or house, they will prepare a free valuation for your property as a first step.

This initial valuation can serve as a basis for you to decide for or against a sale. After the initial decision, an official value appraisal by a sworn expert can be obtained at any time if required.

Your valuation partner will cover the costs incurred in the event of a sale through the brokerage fees.

The determined optimal price range for your property relates directly to your region and the location on the regional real estate market. The valuation of real estate experts enables the optimal placement of your property throughout Germany.

Don’t limit yourself to local real estate agents

Without financial obligations you receive a professional valuation by real estate agents, with whom you subsequently cooperate for the sale. Experts are experienced in the market and know the prices of comparative properties in your area homes.

The comparative value can also be determined for undeveloped land. The comparative value method only takes into account properties in similar locations and with a comparable layout. The properties included in the valuation should be from the immediate vicinity of the residential property.

The comparative value method is considered to be particularly realistic. It is frequently used to determine the value of properties, as the locations are relatively comparable from region to region.

Valuation for the sale of real estate

All important information about the valuation of real estate sales summarized for you: Valuing a property.

Income approach: Breakdown of market value & building income value

The capitalised earnings value method divides the property into the market value of the land and the building income value.

Land value interest = 7 percent * 100,000 euros = 7,000 euros

Building income value = 5,600 Euro * 12.50 (multiplier) = 70,000 Euro

This includes rental income, maintenance costs and costs for managing the land and building. Accordingly, the rental income less the management costs and the land value including its interest are compared.

• Capitalised earnings method

Material value method: Value for the new construction of a property

The calculation first uses the standard land value to determine the market value of the land, then the real value of the building is added.

The real value of the building is calculated on the basis of the building’s production costs less any reductions for age. The real value of the land (market value of the land) and the real value of the building are added together and multiplied by a real value factor.

Value in kind = (100,000 Euro + 150,000 Euro) * 0.5 = 125,000 Euro

The calculation of the asset value factor is based on the building type, the preliminary asset value and the standard land value. The total tangible asset value determined in this way indicates the financial resources that would be required to rebuild the property.

• Real value method

Comparative value method: Comparison of similar properties

The comparative value method compares your property with similar properties. It is used in particular for the sale of owner-occupied apartments and houses. The comparative value can also be determined for undeveloped land.

Price per square metre of the comparable property = 300,000 Euro / 100 sqm = 3,000 Euro per sqm

Purchase price of the property to be valued = 3,000 Euro * 200 sqm = 600,000 Euro

Only properties in similar locations and with a comparable layout are considered in the comparison. The properties included in the valuation should come from the immediate vicinity of the residential property. The comparative value method is considered to be particularly realistic. It is frequently used to determine the value of properties because the locations are relatively comparable from a regional point of view.

• Comparative value procedure

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The partial auction for communities of heirs

Objects such as real estate or land often give rise to disputes in communities of heirs. The ideas of how to proceed with the common property are too different and the participants cannot agree. Every heir has the right to demand a partition of the community of heirs at any time and thus to force its dissolution. In such a case, a partition auction may be the last resort to settle the disputes and dissolve the community of heirs. You can find out here what needs to be taken into account in the event of a dispute and a partition auction.

Learn more about communities of heirs!

Application for partition auction – the correct form must be observed

An application procedure always precedes a partition auction. This application can be made by any heir of a community of heirs. Formally, a written application, which must be submitted to the competent district court, is sufficient. However, it must be accompanied by certain documents. In the first application, it must be proven beyond doubt that the applicant has co-ownership of the property to be auctioned. The appropriate document is a corresponding extract from the land register, which must not be older than six months. Once the application has been received, it is examined by the local court and the next steps are initiated.

Partition auction & community of heirs – Video

The procedure – step by step to the partition auction

The process of a partition auction already begins with the application that one of the heirs from a community of heirs must file with the district court. This is followed by further steps in order to carry out the partition auction in accordance with the law.

The expert opinion – assess the value of the property

A partition auction requires an appraisal of the value of the property or land. The court needs this in order to determine the lowest bid for the partition auction. Such an appraisal can be obtained in three different approaches. The petitioner can obtain a private appraisal, but the entire community of heirs must agree to this step. An alternative is to obtain the appraisal through the court. Often a valuation report is already available. As long as this is not older than a few weeks or months, it can also be used.

The minimum bid – determined by the court

The court sets a so-called lowest bid before the partition auction to ensure that the proceeds of the partition auction can cover the costs of the proceedings and all claims of the heirs. Once this is determined, neither the market value nor the purchase price of the property or land is relevant and the lowest bid is considered the notional value. It is made up of the rights, encumbrances and minimum cash amounts. The person who acquires the property or land at the partition auction assumes all rights and encumbrances in addition to the subject matter and thus becomes the purchaser and debtor.

The auction – the highest bid gets the surcharge

Once the lowest bid has been determined by the court, a date for the partition auction can be set. Subsequently, the partition auction of the property or the land should be advertised in newspapers and on the Internet in order to attract interest in the property. Viewing appointments are also possible in consultation with the community of heirs. On the auction date, all interested parties can submit bids within a predetermined time frame. The highest bid is accepted for the property and the community of heirs may be divided.

The duration – varies from case to case

The duration of a partition auction is different depending on the case. It depends in particular on how long it takes to prepare the expert opinion and how long it takes to process the application. The applicant can only shorten the duration by already having a valuation report available when filing the application and the court agrees to its use.

The disbursement – dispute of the community of heirs

The community of heirs does not successfuly dissolve until the proceeds have been successfuly distributed. Disputes can also arise here. If the testator has not determined the distribution in his will, the statutory inheritance quotas usually apply. If the heirs do not agree, a civil action may be brought. The proceeds from the partition auction are deposited with the district court and are not paid out until the heirs have reached a written agreement on the distribution.

The costs – how much are they and who bears them?

Certain costs are incurred for a partition auction. These include the application costs, the procedural costs, the expert’s fees, the lawyer’s fees and the costs for newspaper and internet advertisements. All these costs are incurred when the court orders a partition auction. The costs for the notification of the co-heirs are part of the application costs. Usually, the costs of the proceedings have to be paid as an advance. Who bears the costs of a partition auction depends on the outcome of the auction. If the auction is successful, all costs will be deducted from the proceeds and thus each heir will share equally in the costs. However, if the auction is not successful, the applicant bears the costs alone and the community of heirs continues to exist.

The alternatives – private sale or voluntary auction

The partition auction involves some risks that should be well thought out in advance. The property could be sold below value and lead to low profits for the heirs. There are some alternatives that eliminate these risks. The property can be sold privately, saving the application, procedural and legal fees. In addition, the heirs can choose the buyer themselves and thus ensure that the property is not sold below value.

Another alternative is the voluntary auction. The community of heirs can turn to a public auctioneer who organises and conducts an auction. The advantage here for the heirs is that the minimum bid can be determined themselves and thus there is no risk of an auction below value. However, in both cases the community of heirs must unanimously agree to the sale of the property.

The most important questions on the subject of partition auctions in communities of heirs

A partition auction can resolve disputes within a community of heirs, but it can also reignite disputes. To avoid mistakes and save time, it is important to take the right steps. Lukinski’s experts answer the most important questions on the subject of partition auctions in detail for you.

Why a partition auction?

A partition auction can put an end to long disputes, especially in communities of heirs, and lead to a result with which all heirs agree. The partition auction also offers the last resort if no agreement can be reached.

What does for the purpose of abolishing the community mean?

The partition auction success for the purpose of the abolition of the community around from an indivisible article, like a property or a real estate a divisible money equivalent to generate.

What is a partial auction of a house? More terms in our property glossary.

A partial auction is held when several people are co-owners of a property. The partial auction turns an indivisible object into a divisible amount of money that can be divided among the owners.

What does § 1010 BGB mean?

Pursuant to § 1010 of the Civil Code, the co-owners of a plot of land may make arrangements for the administration or use of a plot of land or exclude the right to demand the dissolution of the community.

What did ZVG mean?

The abbreviation ZVG stands for Zwangsversteigerungsgesetz. This regulates both the forced sale and the forced administration.

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Experts – qualification, tasks & costs

Especially for people without much expertise in real estate, it is difficult to assess whether the requested sum is realistic and whether the property is really worth that much. To find this out, experts are called in to help, who can determine how high the value really is through specialist knowledge and an objective assessment. But where can you find such experts and who is really entitled to give an expert opinion?

Experts certified by the EU

Since the name of the expert is not protected, anyone can use it. To prevent this and to prove a real qualification, there are experts certified by the EU. They have a high level of expertise and professional experience. They prove their knowledge by passing a test and have to prove their new level of knowledge every five years. The test is carried out by accredited certification bodies and only those who prove their level of knowledge again every five years are awarded EU certification. In any case, this qualification identifies a good expert who can help you with his specialist knowledge.

Publicly appointed and sworn experts

As the name suggests, these experts are appointed and sworn in by an institution under public law. They are also called öbuv experts. Such an institution under public law can be the chamber of architects, engineers, industry, crafts or commerce of a country. They then examine the personal and professional suitability of the applicants and if they are qualified, they are appointed for five years. They act under the values of objectivity, conscientiousness, independence, freedom from instructions and impartiality, which is why they are preferred under the Code of Procedure.

Free, independent experts

Freelance appraisers are not subject to examinations or government monitoring. They act independently and without verification of qualifications, which is why they are considered more of a risk. Nevertheless, they should have a certain education to be able to prove their qualification. Expert knowledge and many years of professional experience as well as rules should be present in the level of knowledge in order to be able to carry out the profession as an expert conscientiously.

Chartered Surveyors from the Royal Institution of Chartered Surveyors (RICS)

A chartered surveyor is a surveyor who is chartered by the Royal Institution of Chartered Surveyors (RICS). The institute is a professional association of real estate experts and surveyors, which is represented in about 150 countries today. The qualification as a Chartered Surveyor requires very high professional standards and has a high practical relevance. Trained chartered surveyors are therefore very good experts whose judgement you can trust with a high degree of certainty.

Experts from associations

Associations can appoint experts according to their requirements, no matter how high or low these are. There is no common system for the requirements here. Should you consult such an expert, pay particular attention to what training and experience he brings with him and how long he has actual experience on the market. Complete appraisals require a high level of knowledge, which is why you should not skimp on this point. Go for a good valuation rather than a low price.

Authorities as experts through expert committees

In the area of land, the expert committee is to be named here. In authorities of all districts and independent cities there are independent expert committees. These committees receive from notaries and courts all purchase and heritable building right deeds about real estate and resolutions about compulsory auctions, as you are obliged to do so. The deeds go directly into the collection of purchase prices and can be taken into account by the experts of the authorities.

Costs for appraisers – preparing value appraisals

Costs for expert opinions are not regulated or fixed by law. The costs for an expert opinion and for the expert are therefore agreed individually and depend on the respective case and the expert. However, many experts are guided by the old Ordinance on Fees for Architects and Engineers (HOAI). Hidden costs explained: buying costs. This states that depending on the purchase price and the degree of difficulty of the effort between 2 and 10 percent of the value of the house as a fee. So if you want an expert opinion from a surveyor, make a note in advance of exactly what the expert opinion should contain and which aspects will be taken into account in order to avoid any surprises when it comes to the bill. The rule is that a full appraisal is more expensive than an appraisal alone. It can be billed by hourly rate as well as by minimum fee or even by commission. Get several offers in advance that are comparable in terms of both price and service and find the best offer for you!

Determining the value of real estate – this is how experts proceed

But what are the exact criteria to determine the value of the property and how exactly do appraisers proceed in preparing the appraisal? In general, according to § 194 BauGB, the market value should reflect the price that would have been achieved in the normal business year at the time of the determination without regard to unusual or personal circumstances. In order to determine this value, experts are guided by various criteria:

The ground value

The standard land value is probably the most important criterion for determining the market value, as it is the basis for its calculation. The standard land value indicates the value for one square metre of undeveloped land in the respective standard land value zones.

The structural and technical condition of a property

The second important criterion is of course the condition of the property. This includes not only the materials used, such as building materials, wiring, pipes or electrical systems, but also the age of the property and the materials. In addition, extras such as outdoor facilities, carports, gardens and garages can have a positive effect on the valuation and reinforce a positive assessment.

The location of the properties

On the one hand, the location of the property includes the infrastructure of the nearby surroundings, such as transport connections, shopping facilities, but also connections to doctors or hospitals. On the other hand, trendy locations have an advantage, especially in large cities. The higher the popularity of the neighbourhood, the higher the value of the property there.

The energetic state

First of all, of course, the presentation of the energy certificate is necessary. This shows how high the energy consumption is. The higher, the worse. In addition, how high quality and new the insulation of the outer walls and the roof are. These significantly determine the energy consumption and the energy costs increase enormously with poor insulation.

The degree of development of the property

Also important for the value of the property is the degree of development. This means that it must be checked whether the property is connected to important networks such as the water system, the telephone network but also the electricity. Of course, it is an advantage if the property is connected to all important networks.

Contaminated sites on the property

Contaminated sites on the property are of course not advantageous for the property, as they have to be taken over by the new owner. Such contaminated sites are noted in the land register and negatively affect the appraisal, as more costs come to potential buyers.

The current market situation

The price of a property is always determined by supply and demand, which is why this criterion also plays an important role for the expert. Here, sales data from comparable properties in similar locations are used and compared with the data for the property under review.

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