Valuation of real estate: How to recognize the true value

The value of a property is influenced by numerous factors. Whether you want to buy or sell a house or apartment or just want to know the current market value, you often face the question: How do I determine the real value? In this article, we will look at important criteria, methods, and examples, so that you gain a clear understanding of property assessments.

Why Getting the Right Valuation is So Important

Valuing a property is not just a bureaucratic act; it can be crucial for whether you successfully buy or sell. An overpriced property can deter potential buyers, while a price that is too low may result in losses. Additionally, neutral appraisals are often the decisive criterion in bank and credit negotiations, inheritances, or divorces.

A solid valuation of a property is the key to any successful transaction.

The Main Methods for Property Valuation

In practice, three classic methods have established themselves. Depending on the type of property, a different method is often chosen or a combination is used to arrive at a reliable result.

1. Comparative Value Method

Basic Idea: Current purchase prices of comparable properties in similar locations are used to determine the market price.
Requirement: There must be sufficient comparative data available for a realistic assessment.
Typical Application: Especially for condominiums, terraced houses, or single-family homes with homogeneous structures.

2. Earnings Value Method

Basic Idea: Here, the earnings, i.e., the return, is the focus. This method is particularly used for income-generating properties, i.e., properties intended for rental purposes.
Rental Income as Basis: The capitalized value of the expected rents forms the core of the valuation.
Cost Factor: Operating costs, provisions for maintenance, and potential modernization investments are included in the calculation.

3. Cost Value Method

Basic Idea: This method determines the value of a property based on the actual construction costs of the building and external facilities, plus the value of the land.
Discounts and Premiums: The current condition of the property is taken into account; any wear and tear or renovations affect the value.
Typical Application: Often used for special properties (e.g., listed buildings) and for properties without sufficient comparative data.

Location, Location, Location

In the real estate industry, the saying goes: Location, location, and again location! The location is often the decisive value factor and can even compensate for inferior construction quality if the property is located in a particularly desirable area. Important factors include:

Infrastructure (shopping options, schools, transport connections)
Economic development of the region (job market, new construction projects)
Reputation and image of the neighborhood
Potential for value appreciation

Factors Influencing the Value of a Property

In addition to location, there are several other factors that should not be underestimated.

Size and Layout: A well-laid-out apartment is more attractive than one with an unfavorable floor plan, even if both have the same square footage.
Condition and Construction Quality: Renovations, refurbishments, and the quality of the materials used have a significant impact on the valuation.
Market Trends: If property prices in a region rise, the value of your property generally increases as well. The same applies in reverse.
Unique Features: Exceptional architecture, heritage protection, eco-building materials, or smart home technologies can significantly affect the value depending on the target audience.

Tabular Overview of Valuation Methods

Method	Advantages	Disadvantages
Comparative Value	Fast, simple, and market-related	Requires a lot of comparative data
Earnings Value	Good focus on income properties	Complex determination, prone to forecasting errors
Cost Value	Independent of market prices	May not always accurately depict actual demand

Practical Tips: Making It Easier

Professional Help: A real estate appraiser or agent knows the market and has access to relevant databases.
Use Online Tools: Many platforms offer non-binding estimates. These can provide a first guideline but rarely replace a detailed analysis.
Site Visit: A thorough walkthrough of the property and conversations with neighbors or the property manager can provide valuable insights into the actual situation.
Consider Potential for Value Appreciation: Renovation and remodeling options can significantly raise the price level.

FAQ: Frequently Asked Questions

Question: How often should one have the value of their property assessed?

Answer: A significant change (such as a renovation, an extension, or marked market fluctuations) is always a good time for a reevaluation.

Question: Can I assess my property myself?

Answer: Theoretically yes. However, you need solid market data and experience to realistically assess all factors. A professional valuation is often more precise.

Conclusion

Property valuation is a complex topic that requires knowledge about the market, the property itself, and future prospects. With the right methods, some research, and possibly professional support, you can gain a realistic picture of your property's value. This way, you can make purchase and sale decisions with confidence and benefit from your investment in the long term.