Valuation or market value appraisal - What is the difference?
What you as a property owner should know about property value estimates
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Welcome to the year 2021 - and to our latest edition of the Immo-Gazette
on the topic of market value
My topic today:
What is the difference between a market value assessment, market value assessment, appraisal, market price estimate, valuation and other statements about the value of your property? You have certainly come across all these terms if you have thought about the value of your property.
As the owner of a house, a flat or a plot of land, you are interested in finding out how much your property is worth. But what value do you actually want to know? The price you would get if you sold it in the near future? The value at stake in a divorce or inheritance case? The value for a transfer to an heir during your lifetime? The value for the purpose of a dispute with the tax authorities about inheritance tax that you will have to pay as an heir?
There are many occasions to obtain a statement of value. But: Is value not equal to value? Basically, the Building Code (from 1960, so now a proud 80 years old) gives the answer here by equating market value with market value and defining how this value is to be determined. (§ 194 BauGB, you are welcome to google it). All valuation guidelines and ordinances that have been issued since then are based on this definition of the Building Code.
To determine the value of your property, you can commission an expert, ask a neighbour or obtain information (often free of charge) from a property portal after entering some key data. The expert can prepare an appraisal for which you usually pay between €1,500 and €9,000 (but the sky's the limit); your neighbour tells you how much the neighbour in the next side street sold his house for (you can't check if it's true) and the real estate portal usually gives you a range, e.g. "The value of your property is between €345,625 and €468,921". That's right, you kind of guessed that too....
If you commission three experts - one without an additional designation, one publicly appointed and one certified expert - with an appraisal, you may end up with €6,000 less in your account and three market values for it.
Are you now smarter than before?
Let's put the cart before the horse. The first question is, where do you want to go? Do you want to sell in the near future? Then the local estate agent probably knows best what you can achieve. He will give you an estimate of value, nowadays usually calculated (with good software), and will also have compared the value with the sales prices from his own database. The market will show whether he is right with his estimate. You can, however, also have an expert appraisal prepared by a trained surveyor who will thoroughly inspect the land register, building file and the property itself and then prepare an expert opinion that also includes such factors as easements or rights (residential rights, heritable building rights, utility rights, etc.) building damage (or signs thereof), tenant problems, location and location development or neighbourhood development in his considerations. What is determined by him is also an estimate of the purchase price to be obtained on the market. (It is generally not necessary to commission an expert for a full appraisal in the case of a sale).
If, however, you need the value for any other of the above-mentioned reasons, then a full appraisal must be carried out to determine the market or market value in accordance with Building Code § 194. The market value determined in this way is a binding statement on the basis of which decisions are made. In the case of a divorce, for example, it is a question of payment to the partner moving out; in the case of an inherited property (real estate) it is a question of inheritance tax; in the case of refinancing it is a question of the mortgage lending value. Whether this value determined in this way would actually have been achieved in a sale - or more or less than that - no one can say. (Unless, of course, the property is then sold after the dispute). The preparation of a balance sheet can also make such an appraisal necessary; an overview of assets, a status appraisal prior to comprehensive refurbishment and modernisation measures, in order to determine the market value prior to refurbishment; there are many reasons and occasions.
Let us summarise:
If you are planning to sell in the near future (within the next 12-18 months), have a market price estimate prepared.
If you need an appraisal for other reasons, have a market value appraisal carried out.
If you have any further questions, please do not hesitate to contact me. Please use the form at the bottom of this page.
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