Property valuation: When is the comparative value method suitable?

How much is a property worth? As much as someone is prepared to pay for it. At least that’s the idea behind the comparative value method. It may seem simple. However, the question arises as to the extent to which properties can be compared with each other.

The comparative value method is one of three methods of property valuation in Germany and is regulated by the German Property Valuation Ordinance (ImmoWertV). This approach not only takes into account factors such as the location, features and age of the property, but also accurately reflects current market demand. Due to its accuracy and simplicity, it is often used by property 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 property types where there are sufficient comparable properties. These generally include freehold flats, undeveloped plots and terraced houses. In urban areas, comparable flats can often be found in the same building or in the same street. In rural areas, this is more difficult as there is often a lack of similar properties. If no suitable comparable properties are available, it is recommended that the asset value approach be used for the valuation.

What data is used?

The basis for the comparative value method is formed by the purchase price collections of the local expert committees, which record and analyse all notarised property sales. Sufficiently similar transactions must be available for a reliable valuation. The standard land value map, which is also compiled by the expert committees and contains information on the structural utilisation and land value in various municipal areas, can serve as an alternative data basis.

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, property experts work with premiums or discounts. For example, the value of a property located on a busy road is set lower than that of a property in a quiet cul-de-sac. The more differences and individual features a property has, the higher these premiums or discounts will be, which reduces the reliability of the comparative value method. Thanks to their expertise and experience, experienced estate agents are well placed to judge when the comparative value method makes sense and when it does not.

Do you want to have your property professionally valued but don’t know which method is best? Get in touch with us! We will be happy to advise you.

Note

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where 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 individual case.

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