Determining the value of real estate:
The market value is a fundamental value in determining the sale or purchase price of a property (land, house, apartment). The determination of market value is also necessary for the lending of properties due to financing purposes, because banks usually determine the maximum mortgage lending value based on the market value of a property. The determination of the market value is carried out by an expert. The determination of the market value is regulated by the legislator uniformly in the Building Code (BauGB, § 194). According to the Building Code, the determination of the market value takes place on the basis of the price that could be achieved in business transactions at the time at which the determination should relate to the legal situation. As a rule, no consideration is given to unusual conditions, only the condition and location of the property are included in the calculation.
In principle, one can say: The property value results from the market value. An expert needs some documentation to calculate the market value. These include, among other things, the land register, extracts from the land register, area calculations, construction drawings, leases and a few other papers. The valuation report can only be created if the required documents are available.
Procedure of determining the market value
The material value of a property is the basis for the determination of the market value . Three different valuation methods can be used for determining the market value. These are the asset value method, the discounted earnings method and the comparative value method. Which method is used to determine the market value depends on the type of property.
The Real Estate Value Procedure
The determination of the market value by means of asset value method is the most common but also the most complex procedure for determining the value of a property. Especially in owner-occupied single-family and two-family houses as well as condominiums, this method is used for determining the market value. If the property value of a property is to be determined, the property and land value are determined separately. The derivation of the market value of a building is made here from the construction costs that were actually incurred in the production. It is assumed that the building value of a new building should always correspond to the production costs. Damage or renovation needs are not included in the determination of the market value. The property value is also determined on the basis of the so-called land value table of the corresponding region. The total value of the real estate is then derived from the value of the building and land.
The income value method
For leased or commercially used real estate, the so-called Earnings Value Method is used to calculate the market value. For such objects, the income value serves as the basis for determining the mortgage lending value. In general, the determination of market value by this procedure always assumes the sustainably achievable annual net income, which generally results from the total rental income per annum reduced by the management costs (eg administrative costs). The building yield value is calculated by multiplying the net income by the remaining useful life of the property.
The comparison value method
The determination of the market value using the so-called comparison value method is a realistic calculation, which is mainly used for the calculation of the Value of land is applied. The calculation is based on comparable properties in a similar state and location. The most important prerequisite for using comparable land as such is that it is a sufficient number of objects. For real estate agents, the comparison method is a popular method of determining market value. With it, the selling price can be determined, because the comparison method gives a fairly accurate picture of the possible recoverable price of a property on the market.
The actual, final purchase price of the property
Often the actual purchase price of a property deviates strongly from the tangible value and thus also from the derived market value. This difference to the actual market value is based on the fact that all sales prices for real estate are usually based on negotiation. Above all, it is therefore important that a market value is determined, which reflects the exact condition of a property. As a rule, this is done by a independent expert , who carries out the determination of the market value.
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