Jens Krüger | Wertermittlung, Immobilienbewertung

“The market value (market price) is determined by the price at the time of the normal operation of the object, in accordance with legal conditions and actual characteristics, location, regardless of special arrangements and personal circumstances.” (In accordance with paragraph §194 BauGB).

In other words:

Market value, or market price, is a forecast of the most probable property value based on a specific key date, taking into account all relevant characteristics, such as: Location, physical characteristics, legal norms.

Credit value is a term used in the work of credit institutions, which represents the total value of the object, which is likely to be realized in the long term at any time. The value of mortgage lending can be the absolute upper limit to which a credit institution can provide loans based on internal rules.

The determination of the cost of mortgage lending is determined by the Regulation on the definition of mortgage lending (BelWertV).

The tangible asset method is typically used for owner-occupied properties, such as single family homes, town houses, or two-family homes.

This is a process based primarily on production costs. However, since production costs say little about the commodity suitability of property, the characteristics of an object are regularly compared with a so-called market adjustment factor, or real estate value adjustment factor. Market adjustment factors are usually published by the review commission of the area concerned. The basis for the development of market adjustment factors is the collection of the procurement expert committee.

First of all, production costs are determined using tabular standard production costs. For real estate, which is not a new construction, it is necessary to take into account age restrictions. This leads to the structuring of material characteristics.

In addition to the actual value of the object, it is necessary to take into account the physical characteristics of external building structures (for example, paving, fencing, etc.), such as the value of the land.

This leads to the need for a preliminary assessment of the property, which in turn leads to a temporary market value using the appropriate market adjustment factor / material cost adjustment factor.

After taking into account all characteristics, including costs, such as: construction defects, damages, construction loads, road rights, etc., the final market value is derived.

The determination of the market value based on the material value in accordance with ImmoWertV is as follows:

The cost of building buildings:
–Age of construction
=Property value of structures
+Cost of structural outdoor structures
+Land value
=Material value (buildings and property)
xEvaluation factor
=Pre-market value
±Property Features
=Market value

The income capitalization method is an appraisal procedure that focuses on the expected income from the property. As a result, it is commonly used for apartment buildings, residential and commercial buildings, office buildings, industrial facilities, hotels, nursing homes, etc.

The most important for this is a D a consistently achievable gross profit, taking into account the location, condition and equipment of the respective valuation object.

First of all, a consistently achievable gross profit is determined, that is, rental income, which is assessed as sustainable and realistically achievable.

Net income refers to both the building and the land. Since the land has an infinite lifespan, but the building has a limited lifespan (exceptions include the listed buildings), the income from the value of the land is deducted from its net income. This helps in determining net income attributable solely to the construction part.

Net income associated with a share in construction leads to profitability of a building’s share through the use of a so-called multiplier. The multiplier is due to the residual useful life of the building and the interest rate on real estate.

After studying the related factors affecting the value, such as construction defects, damage, construction loads, road rights, etc., as well as the cost of land, the yield factor, the determination of market value based on the method of profitability in accordance with ImmoWertV can be schematically represented as follows:

Gross profit:
–Management costs
=Net income
–Land interest
=Net profit (share of buildings)
XMultiplier
=Revenue (building share)
+/-Other factors affecting value
+Land value
=Amount of income

The comparative cost method is based on direct or indirect comparison of recently sold objects, which are quite similar in type and indicator of use and location of construction, year of construction, construction, condition, equipment, etc., and are also adequately adjusted by the relevant object evaluation factors.

To evaluate condominiums, it is advisable to use the comparison method, since many condominiums are priced at a square meter of living space.

The comparative cost method can always be used to evaluate condominiums if there are sufficient purchase prices for comparable apartments.

Market adjustment factor is required under the tangible asset method, as net operating costs usually do not reflect the market level. They are obtained from the relevant expert committees based on the collection of the purchase price.

Property Valuation Committee is an institution based on the Building Code. His task is to ensure transparency in the real estate market. To this end, the expert committee receives a copy of each contract for the sale of land from the relevant notaries. The essential features of the contracts are listed in the so-called shopping collection.

Based on the collection of purchase prices, the expert group obtains all relevant market data, such as: for example, market adjustment coefficients, property rates, comparison ratios, profitability ratios, land value, etc.

Each contract of sale of property, condominium or landlord is sent by notaries to expert committees. Purchase contracts are valued by affiliates and recorded in the purchase price compendium. Information from the contract of sale is complemented by construction plans, information from the real estate cadastre, reports from municipalities on the collection of development fees. The content of the price collection for goods is subject to data protection.

Information from the collection of prices for goods may be different in each case. Data is provided if comparable information about the purchase is available, because there are cases of anonymous purchases. Thus, the possibility of making a general conclusion about individual sites or individuals is excluded.

Normal production costs are the average cost values ​​for the entire Federal Republic of Germany, which refer to a specific key date. Therefore, they need to be adjusted for regional conditions, as well as for the date of evaluation.

The older the building, the less valuable it is. This depreciation is explained by the fact that the use of a “residential” building becomes more and more uneconomical as it “grows up” compared to the use of a new building. The loss of value should be taken into account as a correction value in the material cost procedure.

Gross profit is the net real rental for a property.

Net profit is a gross profit minus management costs.

Management expenses are current expenses on property management. These include administrative expenses, running costs and loss of rent.

The multiplier, also known as the net cost factor or the discount factor, is a factor used to capitalize the present value, that is, in the area of ​​determining the value of net profit. The present value ratio is calculated as the ratio of the remaining useful life and the interest rate on real estate.

The real estate interest rate is the interest rate on which the market value of real estate depends on average.

The interest rate on real estate is determined on the basis of purchase prices and net profit for similar constructed and used lands, taking into account the remaining useful life of buildings in accordance with the principles of the capitalized income method. The real estate interest rate is an arithmetic variable that depends on the general level of rent, the general economic situation and the general situation on the capital market.

The remaining useful life of buildings is the period of probable economic exploitation of physical structures, subject to proper support and management. This factor is usually determined by subtracting age from the total economic life of the structures.

In Germany, ImmoWertV compulsorily regulates the principles for determining market values ​​in paragraph § 194 BauGB.

Due diligence reviews describe the full property research from the point of view of its weaknesses and strengths in anticipation of real estate investments.