This is a question everyone asks as soon as it comes down to buying a house or just looking at house and apartment adverts. What is the house “really” worth? The answer is as simple as it sounds: whatever you or another buyer is willing to pay. Unless the price is regulated that’s the way it works: demand and supply. The real question though is: how can you determine a fair price so that you are not ripped off.
Real value (Sachwert) and capitalized earning value (Ertragswert)
For both, a new house as well as an old property the basis of the valuation is the price of the property including the price of the land it is built on.
capitalized earning value
This type of valuation is based on the net earnings minus the total expenditure – all multiplied by factor (based on the region, between 12 and 40). This is most often applied with rental properties.
Market value appraisal (Verkehrswertgutachten)
The market value of a property (or just a piece of land) is the current, and also the future achievable selling price of the real estate. Most often a certified expert creates the appraisal. He needs to be independent in order to be believable for all interested parties. These could be a buyer, a seller or a bank who might be giving you a loan based on that appraisal.
The market value does not necessarily reflect the resale value but definitely can be used as an indication.
Other options to determine a fair price of the house is to check what houses sold for in the recent past – in that particular region. You can check the committee of valuation experts (Gutachterausschuss) of your region to check the prices of houses sold in the past. They are independent and will have several categories (single homes, apartments, multi-apartment buildings, etc). Just looking at adverts of the past only makes 80% sense, as the prices advertised are not necessarily the prices paid by the buyer. But this could be a first indication.
Resale value: main driver is Performance (Wertentwicklung)
The appreciation of the property is the real driver of a resale value over time. You can differentiate between intrinsic and extrinsic factors for the performance.
Intrinsic: especially modernization effort like new bathroom, insulation, additional balconies etc. will increase the value of the property.
Extrinsic: External factors like infrastructure can increase or even decrease the value of the real estate. Optical fibre, public transport can increase the value, while a chemical plant being built next door obviously will decrease it.
What does it mean for you as a buyer: Look at local politics, if you’re buying… ask neighbors on what’s being planned over the next couple of months and years.
Want to know the fair value of the house you want to buy?
Knowing the evaluation of the house you want to view will give you two major advantages:
1. A point to start (or finish) your negotiation
2. Knowing what the bank will give you as a loan
Book a meeting free of cost to get an evaluation done to have the upper hand with the seller and the bank.