Do you plan to buy or sell real estate and need a property valuation in Germany? An accurate value appraisal ensures you get a fair price for the apartment you want to buy or sell. It is important that you understand how property valuation in Germany works to get the best deal.
If you plan on buying a house using a German bank loan, the bank will perform their own appraisal and write the data in the mortgage offer. However, it is important that they appraise the property independently. With a positive value check, you can get the mortgage offer and validate it before signing the purchase and sale agreement.
If you are the seller, a qualitative property valuation in Germany ensures you get your home’s worth when you sell it. It will allow you to get the right market price and prepare for an effective property selling process in Germany.
Real estate valuation methods used in Germany are the same ones used in other major markets in Europe:
The Cost approach
This method refers to the estimation of the cost to build a similar property in the same location. This means that you add the cost of buying the land at current offer prices to the cost of constructing an alike house or apartment building. The cost calculation has to take into account the same standards (size, bathroom & sanitary elements, flooring, heating system…) and the land has to have a similar size and locations. For instance, if we value a luxury apartment, we need to calculate the cost of alike upscale construction materials. This method is quite interesting to get a fair valuation of a land, house or a building for instance. However, the cost approach hits serious limits when it comes to a house or apartment located in the city center where there are no possibility of getting a new land plot at whatever sale price!
The Income value approach
This real estate valuation method consists of capitalizing future income generated from the rent, hence it’s more appropriate for investing properties. The future income consists of the net rent income and the expected worth appreciation. The net rent income is calculated by deducting HOA, management, services and maintenance fees from the warm rent. The expected value appreciation is based on the buyer subjective assumptions related to the property market development. For example if you buy an investment property in Berlin, you can not only bet on the rent income but also on the worth increase as future income, giving that Berlin has registered double-digit price growth last years.
The Sales comparison approach
This is the most used value assessment method when it comes to self-use apartments in city centers. It consists of benchmarking the property to recently sold properties (or currently listed ones) in the area. This valuation methods offers the advantage to capture the last market trends and price developments in the neighborhood. For example, if the task is to value an apartment in Berlin-Prenzlauer Berg, the appraiser has to look for comparable apartments there or adjacent areas like Friedrichshain (but not in Charlotteburg!) It is the most used method used by agents when it comes to value apartments large German cities such as Frankfurt, Hamburg, Stuttgart, Cologne and Munich.
Which factors are key to value a property in Germany?
There are many factors that determine the value of a property in Germany. Some value factors are related to the general market and reflect the offer and demand for properties both in the city and the immediate surrounding.
We can split the main valuation drivers in Germany into 5 categories:
General market conditions
When buying a property, mortgage rates and real estate prices’ trends matters a lot not only for the buyers but also for the landlords. There is no exception for real estate valuation in Germany. Indeed, low interest rates and strong demand for housing will benefit indirectly to the seller because he can get to get the highest sale price.
At the opposite side, if interest rates soar like recently, since the war started in Ukraine, buyers in Germany have higher monthly instalments on their mortgages so that they can afford less purchase power and budgets.
The increase of residential German mortgage rates in results into shrinking the affordability of properties and hence number of candidates for a property purchase. If the mortgage rates continue to increase, this will have a negative impact on selling prices and real estate valuation in Germany.
Demand for the area, facilities and transports, general prices of the area, demand for the micro-locations and immediate surrounding is nice and sought-after…Location of your house will have quite an important impact on your property appraisal in Germany. Location can fall into micro or macro layers. Micro layers point to the nearby environment and amenities, such as shops, amenities, places to go out, parks, , cafes, and other businesses near the house. The macro environment is the wider surrounding, such as the district.
Valuers might also consider the projected growth of the location, including addition of roads and new traffic connections. However, addition of a busy road just in front of your premises will diminish its worth. Further, value assessors consider the worth of other properties in the area based on recently sold apartments, houses or building in the vicinity neighborhoods.
Lastly, the city also determines the value of the house. The rules and regulations of the property market and prices in Berlin are different from the ones in other cities such as Berlin, Stuttgart, Munich, and Hamburg
These factors are related to the community in which the apartment is located and can have a material impact on your property valuation in Germany. They include the condition of the house (façade, staircase, roof…), the construction year of the building and its construction style & materials. The building heating system and energy efficiency and the number of apartments in the house are considered. In general, newly built properties benefit from best real estate valuation in Germany, as the owner has no significant community works for some decades. Authentic period buildings (Altbau in German) and other types of properties (i.e., sixties or thirties) has to be well-maintained to benefit from good real estate valuation in Germany.
The main factors for a residential property valuation in Germany are: the living size of the apartment, the number of rooms, the quality of the floor plan, the exterior spaces (i.e., balcony, garden, terrace), the ceiling height, the flooring…In this view, the need for interior renovation or improvement, the energy efficiency, the age of the equipment amenities, and systems in the flat (i.e. Water boiler, heating system efficiency) are important data to consider for valuing a property in Germany.
As a property seller in Germany, you may also request for a re-assessment after renovations or after adding modern features to your house so that you enhance the value of your property in Germany.
For an investment what matters the most is the profitability. In this case the rent and the return would be determining for the property valuation in Germany. Return on investment includes all the above-mentioned factors plus the calculation of the net proceed after deducting all costs (i.e., management, taxes…) and considering future renovations. Hence, one should put the numbers together to see clearer to which extent would the investment be profitable for a potential investor. For instance, in rented apartment, the appraiser considers vacancy rate and rent per square meter are most determining factors in determining the cost of a home.
Why to hire an expert for your valuation?
When appraising a home, you have two options. You can do it yourself, or you can hire experts to do it for you.
Valuing a property yourself can be a great way to save money on expert services & fees, but it can be risky. While you can quantify all the costs you paid for buying, it is challenging for self-use owners & landlords to put demand and supply and market trends in the equation. It’s also difficult to take into account all relevant data, especially technical information. Nonetheless, one can still possible to have a look into some information in listings and to have a high-level idea on general real estate valuation rules in Germany. However, every property has its own specificities, technical data and pricing drivers that only market insiders understand.
Licensed appraisers are people qualified to do thorough real estate value assessment. The specialist will analyze the property data and the surrounding area and appraises it based on established procedures for real estate valuation in Germany.
A real estate agent can also help appraise your house. Real estate agents usually use sale comparison approach especially for city center properties. An experienced agent, who has a deep knowledge about the real estate market in the area and understands how works the prices over there, will give the right property appraisal in Germany.
Furthermore, real estate agents are acknowledgeable about most recent housing market trends and know at which prices was sold recent properties. Some agents offer to value your apartment for free so it worth it to call for an expert services and avoid making a mistake on the current worth of the property.
With the right services from a specialist in Germany, you will not give out your house at unrealistic amounts because no buyer will buy a house at an exaggerated price. Hence you can avoid the risk of ineffective sale process, as some overpriced properties stay for a while on the market and loose gradually their appeal to propsective buyers.
This is especially the case of for active real estate markets large German cities such as Berlin, Cologne, Munich, and Stuttgart, and where the buyers screen frequently the offers on platforms. On the other side, selling a property at lower price than market prices will result into a loss in sale proceeds that can be material. When you hire an agent to run your property valuation in Germany, you’ll benefit from the services of a confirmed expert who can advise you not only for the appraisal step but also later at the sale stage.
Above all, if you need a value assessment and you do not speak German, it’s better to call for services of an English-speaking agent. In order to get advisory in English, you can search on the web and contact an English-speaking valuation company in Germany.
There are many factors that are considered for real estate valuation in Germany. If you are not sure of how the market works, you are better off leaving the value assessment to a professional. Professionals are not all the same, one should go for the best experts to secure the most effective services.
Otherwise, value assessment will account for everything in your house, including equipment. Once it is done, the specialist should put everything in writing. You can see a breakdown of what makes up the house’s worth and have an accurate idea on the value range of your flat. A professional property valuation in Germany will show the real worth of your house and allow you to determine the price range for selling based on the calculated worth of the house.
If you don’t speak German, you can choose one of the few English-speaking agents in main German cities (for example in Berlin) so that you get everything explained in English.
Which topics to raise with your valuation expert in Germany?
What are the main selling points of your house? What kind of buyers does your house attract and where to get them?
What has been the price of similar recently sold houses in the neighborhood? What would be a realistic property valuation in Germany’s to sell under current market conditions? How much it would take to finalize the selling process? What services are included in case I decide to go ahead with the sale process?
Those are typical questions that you might ask a real estate agent. It is the duty of a specialist to know about the local conditions, prices trends, sale process, sale duration, steps. Also do not hesitate to inquire about the sale strategy that the Agency will implement when you decide for the sale.
In addition to appraisal process for residential or commercial property, an agent can devise the best marketing strategy. The strategy should be customized to very situation. For instance, if your apartment is in one of the international German cities such as Munich, Berlin, Frankfurt or Hamburg, it makes an international real estate agent. International agents offer optimal visibility and can help you more in this case to get the best price, thanks to their prospective global buyers’ base.
The advantages you get with a real estate expert
A professional property valuation in Germany allows you not only to have clear view on the value of your apartment but to individualize the marketing strategy based on prospective customers. In addition to his prospective buyers, the Agent chooses the best marketing strategy in order to target, in the most effective way, the potential buyers. The appraisal depends also on the capability of the agent to get you the best and most creditworthy buyers both locally and internationally.
An agent with larger outreach will obviously offer you a better valuation than a local one. This is especially the case when the apartment is located downtown of a large international city such as Berlin and Frankfurt. In this case, it’s likely that you need the services of an English-speaking international agent so that you would not only target local buyers, but also reach international buyers and investors worldwide.
For instance, in an international city like Berlin, over half of buyers are international or expatriate as well as English-speaking. It’s obvious that you should go for an English-speaking international real estate agent for your German property valuation.
Key takeaways for your property valuation in Germany
Real estate valuation in Germany is a quite technical process so better to hire a specialist for this.
The Agent that you hire need to have solid references of recently sold properties in the area. In addition to an accurate value assessment the agent can advise you about the sale strategy and process.
If you sell a property in Berlin or any other international city of Germany, it makes sense to hire an English-speaking agent. In the German capital, First Citiz Berlin is one of top-rated international real estate agents and best options for English-speaking services. First Citiz Team offers a free & on-binding property valuation in Berlin as well as comprehensive sale service covering all the steps of the sale process.