Property ValuationHow the Value of a Property Is Calculated

Market Value, Asking Price, Purchase Price – What Is What?

According to § 194 of the German Building Code (Baugesetzbuch), the market value (Verkehrswert, synonymous with Marktwert) is the price that could be obtained in the ordinary course of business – without regard to personal circumstances. The asking price, by contrast, is a marketing decision: it is usually slightly above the expected sale price to leave room for negotiation. Finally, the purchase price is what is actually paid.

The Comparison Approach

In the comparison approach (Vergleichswertverfahren), the value is derived from prices actually paid for comparable properties. For this purpose, the valuation boards (Gutachterausschüsse) collect all notarised purchase contracts in their purchase price collection (Kaufpreissammlung).

Suitable for: freehold apartments, terraced houses, semi-detached houses, typical detached houses and undeveloped plots.

Example: A 75 m² freehold apartment in Bayreuth, built in 1995, well maintained. Comparable apartments in a similar location recently sold for €2,600 to €2,900/m². After adjustments for floor, balcony and condition, the comparative value comes to around €2,750/m², i.e. approximately €206,000.

The Income Approach

In the income approach (Ertragswertverfahren), what counts is what a property earns over the long term. The basis is the sustainably achievable annual rent (gross income), less management costs (administration, maintenance, risk of rent loss). The net income is capitalised using the property yield rate (Liegenschaftszinssatz) and the remaining useful life; the land value is then added.

Suitable for: apartment buildings, mixed residential and commercial buildings, commercial property.

Simplified rule of thumb: purchase price ≈ annual net rent (excluding service charges) × multiplier. In Upper Franconia, multipliers for apartment buildings are often between 13 and 20, depending on location and condition – in Munich, by contrast, often above 30.

The Cost Approach

The cost approach (Sachwertverfahren) adds the land value and the construction costs of the buildings, less depreciation for age. The result is then adjusted to market conditions using a market adjustment factor (Sachwertfaktor).

Suitable for: individual, owner-occupied detached and two-family houses for which there are few comparable properties.

Typical error in reasoning: "I've put €400,000 into my house, so it's worth €400,000." The market does not pay for the costs, but for the benefit. In rural parts of Upper Franconia, the market adjustment factor is often below 1 – so the market value is lower than the sum of land and construction costs.

What Influences Value Most

1. Macro location: city, region, economic strength, population trends.
2. Micro location: street, neighbourhood, noise, view, proximity to schools and shops.
3. Condition and year of construction: roof, windows, heating, pipes and wiring, damp.
4. Energy quality: since the Building Energy Act (Gebäudeenergiegesetz, GEG), buyers pay close attention to the efficiency class and type of heating.
5. Plot: size, shape, orientation, building reserves.
6. Legal aspects: rights of residence, rights of way, listed-building protection (Denkmalschutz), tenancies.

What the Value Does Not Tell You

Even a perfect valuation cannot predict whether a buyer will be found today for this particular property. That is why a valuation always includes a market assessment: how many buyers are currently looking in this location? Which competing properties are on the market? How long will a sale realistically take?

Worked Example, Income Approach: Apartment Building in Kulmbach

An apartment building with six units, built in 1968, partially renovated in 2010, 420 m² of living space, plot of 780 m². The calculation using the income approach looks like this in simplified form:

This is followed by adjustments for special circumstances – such as a maintenance backlog on the roof or rents well below market level. The example also shows why scope for rent increases and the remaining useful life have such a strong effect: just €0.50 more rent per square metre increases the income value here by around €40,000. How investors look at the same property from a yield perspective is explained in Calculating rental yield.

Worked Example, Cost Approach: Detached House in the Wunsiedel District

A detached house, built in 1985, 150 m² of living space, 700 m² plot in Marktredwitz:

A market adjustment factor below 1 is typical of many locations outside the regional centres: buyers there pay less than it would cost to build the house new today. In Bamberg or in sought-after parts of Bayreuth, on the other hand, the factor can be above 1.

Online Calculator, Agent's Valuation or Expert Report?

Online calculators usually work with asking prices from portals. But asking prices are not sale prices – in many parts of Upper Franconia, the actual purchase price is noticeably lower. A free valuation on site closes this gap.

Which Documents You Need for a Valuation

The more complete the documents, the more accurate the result:

• Extract from the land register (Grundbuch), especially Section II with rights and encumbrances
• Cadastral map (Flurkarte) and plot size
• Calculation of living area and floor plans
• Year of construction and list of modernisations with dates (roof, windows, heating, electrics, bathrooms)
• Energy performance certificate (Energieausweis)
• For freehold apartments: declaration of division (Teilungserklärung), service charge (Hausgeld), size of the maintenance reserve, minutes of the owners' meetings
• For let properties: current tenant list with net rents

Whatever is missing, we obtain together with you – for example from the land registry or the municipal building authority.

What Really Increases Value Before a Sale

Not every investment pays off. Experience shows that the following are particularly worthwhile:

1. Small repairs that buyers would otherwise perceive as a "building site": dripping taps, faulty roller shutters, loose tiles.
2. Fresh, neutral paint in heavily used rooms.
3. Complete documentation – it reduces the buyer's perceived risk and thus the discount they apply.
4. An energy advice report (individual renovation roadmap, iSFP) showing what a renovation would cost. This replaces fear with figures.

You will rarely recoup the full cost of major renovations such as a new roof or new heating system when you sell. Details in the guides Preparing a property for sale and on energy-efficient renovation.

Putting Upper Franconian Price Levels in Context

Upper Franconia is not a uniform market. The university cities of Bamberg and Bayreuth are well above the regional average, Hof and Coburg in the middle range, and many municipalities in the Fichtelgebirge and the Frankenwald below it. Even within one city, prices per square metre can differ by a quarter between two streets. You will find current developments in our market reports on Upper Franconia, Hof and Bayreuth and on standard land values.

Value of Freehold Apartments: the Special Features

With freehold apartments, factors play a role alongside the location and condition of the apartment itself that are irrelevant for houses:

Anyone having an apartment valued should therefore have the minutes of the owners' meetings and the budget plan (Wirtschaftsplan) ready, in addition to the floor plan and energy performance certificate. → Freehold apartments, owners' association (WEG) and service charges

Value and Time: How Quickly a Price "Goes Out of Date"

A market value is a snapshot. Interest rates, demand and energy prices change, and with them the achievable price. As a rule of thumb, a valuation remains meaningful for the marketing decision for about six months. After that, it should be reviewed – especially if interest rates have changed noticeably or comparable properties have sold at significantly different prices.

How We Value at FrankenImmo

1. Conversation: your goals, timeframe, special features of the property.
2. On-site inspection: condition, fittings, modernisations, the location in detail.
3. Documents: land register, plans, energy performance certificate, and for apartments the owners' association documents.
4. Market analysis: comparable sales, standard land value, current competing listings, demand in our database.
5. Result: a realistic market value, a recommended asking price and an estimate of the marketing period – in writing and easy to follow.

The valuation is free of charge and without obligation. → Free valuation