German Mortgage

Property valuation in Germany: The most important details

If you plan to purchase a house or apartment in Germany, you need to make sure that the purchase price is fair and follows the German real estate market. To find out, it’s vital to perform a real estate or property valuation.

In this article, we will explain to you:

  • The importance of a property valuation,
  • The different ways to perform property valuation in Germany,
  • The details behind property appraisal,
  • And what factors influence the valuation.

Why is property valuation important?

An apartment or house valuation ensures a fair transaction for both the buyer and the seller. It gives any buyer the reasons why the price of a property is what it is and confirms the seller that the price is competitive in relation to the rest of the local real estate market.

Your lender, usually a bank, will perform their own property price evaluation for the property and write that down in your offer. In addition, many buyers choose to appraise the property independently in order to get a neutral opinion.

For buyers, a property valuation allows them to double-check the offer price before signing the contract. Likewise, sellers want to ensure that the offer price is in line with their property’s current market value. Property owners frequently ask for a property assessment after renovating or modernizing their property, so they know the current value and how much it increased.

There are many different ways to evaluate the value of a property. 

Ways to perform a property valuation in Germany

A few of the common ways that you can perform your own search are:

  • Capital.de. It offers a free German-language tool to look up the average price per square meter.
  • Approaching a real estate agent and asking them for an “Immobilienwert-Einwertung.” This can cost between 100 and 300 euros.
  • Looking for an “Immobilien Gutachter” and asking them for valuation. This is a more expensive option and costs roughly 1,500 euros.
  • Checking with the “Gutachterausschuss” (an expert committee) has the average selling prices of the properties in the same area or even on the same street. The list is based on the prices declared by notaries in the region.

How is property appraisal done?

There are several ways to appraise a property: 

  • the sales comparison approach, 
  • the cost approach, 
  • and the income approach. 

The goal, however, is always to determine the current market price of your property. This is also called market value.

Sales comparison approach

This determines the market values of similar properties in your area. The greater the number of properties and the similarity of properties considered, the more the process will reflect the true value of your property.

Cost approach

If the sales comparison approach is impractical – for example, if there aren’t enough properties to compare in the area – evaluators use the cost approach. Here, current land value is key. Then, the value of the land is added to the cost of a new building, and wear and tear are deducted mathematically.

Income approach

Finally, the income approach is most common for rented properties like apartment buildings. The income from rent serves as a starting point. So, annual rent minus fixed and operating costs multiplied by a duplicator gives the real estate’s value.

Which property valuation method is the best?

Generally, the use of the property is the most important factor in determining which property appraisal method to use. Based on that:

  • A self-use property’s value will depend on the sales comparison approach. If that is not possible, the cost approach is the next most common. 
  • An undeveloped property’s value can also be valued using the sales comparison approach or the cost approach. 
  • If the property is leased, the income method is the best.

And remember: each German city has different market conditions and regulations that dictate their local real estate markets. You can check the property value development of apartments in the major German cities on LoanLink24’s blog.

What factors influence property valuation?

When determining real estate value, the decisive factors include location, overall property condition, and equipment.

Location

Both macro- and micro-location play a role in the property valuation. Macro-location means the region, city, and district. The micro-location includes the property’s immediate neighborhood and its surrounding streets. For example:

  • Macro-location factors: traffic connections, new road work.
  • Micro-location factors:  nearby doctor clinics, shops. 

However, there are also hard and soft evaluation criteria. For example, the district’s infrastructure is a hard factor (i.e., has a more significant influence), while the social class of the area is a soft factor (i.e., decreased impact). 

Property condition

In addition to the property’s location, property condition is also important. The roof, the windows, and the facade are the most important. It’s crucial to remember that:

  • Extensive investments like high-quality flooring or a new heating system help boost the selling price. 
  • Smaller investments like painting and replacing old baseboards also help increase the property’s value.

Equipment

Another important factor is the property’s equipment. A fireplace, underfloor heating, or a greenhouse all help raise property value.

Should you appraise the property independently or get support?

Owners, experts, and brokers can all perform the appraisal. The difference between them is as follows: 

Owner appraisal

An owner can perform an appraisal, but it can be risky. Even though owners can often quantify all costs, this is not enough to give an objective real estate value that takes supply and demand into account. 

Since there are more variants to an appraisal than just costs, a specialist is often necessary for a neutral – and more precise – assessment.

Real estate appraiser

A real estate appraiser is qualified to do your property valuation. They can examine your property thoroughly and calculate market value based on recognised procedures. 

A real estate appraiser’s fees are similar to fees for architects and engineers. If a real estate’s value is up to 400,000 euros, a real estate appraiser will request a fee of about 1,500 – 2,000.

Real estate broker

A broker can also make a property valuation. The broker will usually evaluate the property using the sales comparison approach. A good broker who is familiar with the region will be able to compare applicable prices.

Regardless of the option you chose, your valuation should answer the following questions:

  • Is the condition of the house or apartment reflecting the price?
  • Has the property been maintained decently?
  • Does the property need renovation?
  • What is the current energy spending? 
  • Are the sanitary and heating systems up to date?
  • What is the building material?

Once you have your property valuation, you can sign the contract, and rest assured you paid a fair price for your new German property.

Are you looking for help?

Got a question about the property valuation or home purchase process for non-German residents in Germany? Email us or call us at 0800 05 28 000. We are happy to answer any questions.

Not sure how much you can afford? Check our German Loan Calculator.

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