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Real estate valuation: When is the comparative value method appropriate?
The comparative value method is one of three methods used to value real estate in Germany and is regulated by the Real Estate Valuation Ordinance (ImmoWertV). This approach not only takes into account factors such as location, amenities, and age of the property, but also accurately reflects current market demand. Due to its accuracy and simplicity, it is often used by real estate experts, although it is not suitable for every type of property.
Which properties are suitable for comparison?
The comparative value method is particularly suitable for types of real estate where there are enough comparable properties available. These usually include condominiums, undeveloped land, and row houses. In urban areas, comparable apartments can often be found in the same building or on the same street. This is more difficult in rural areas, as there is often a lack of similar properties. If no suitable comparable properties are available, it is recommended to use the asset value approach for valuation.
What data is used?
The basis for the comparative value method is the purchase price collections of the local expert committees, which record and analyze all notarized real estate sales. For a reliable valuation, there must be a sufficient number of similar transactions. The standard land value map, which is also compiled by the expert committees and contains information on the structural use and land value in various municipal locations, can serve as an alternative data source.
What additional factors are taken into account?
In order to take into account specific advantages and disadvantages of the property being valued compared to comparable properties, real estate experts work with additions or deductions. For example, the value of a property located on a busy street is set lower than that of a property in a quiet cul-de-sac. The more differences and individual characteristics a property has, the higher these additions or deductions will be, which reduces the reliability of the comparative value method. Thanks to their expertise and experience, experienced real estate agents are well placed to assess when the comparative value method is appropriate and when it is not.
Would you like to have your property professionally valued but don't know which method is best suited? Contact us! We will be happy to advise you.
Note
For reasons of better readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.
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