Nowadays, real estate is valued for a wide variety of reasons. Possible reasons may include the sale or mortgaging of a property. Real estate valuation itself is a value assessment regulated by legal norms.
Based on sound structural engineering, legal, and business expertise, they determine the so-called market value. The value is determined for developed and undeveloped properties in the ordinary course of business on a specific date. Within real estate valuation, a distinction is made between three classic valuation methods in accordance with ImmoWertV. One of these methods is the asset value method. Here, the land value is calculated separately from the property value.
The building fabric is taken into account and it is based on the standard land value and construction costs. The method is used for single-family and two-family houses. Another method is the comparative value method, in which real transaction prices are compared. This approach is used for investment properties, multi-family houses, and commercial properties. The third method is the income approach, which is used to determine the value of condominiums. This method considers the return on the rented or leased property. In addition to these three classic valuation methods, there are also international valuation approaches. These include, for example, the discounted cash flow method. This method is used to determine the value of a property. A distinction is made between two values. These are the mortgage lending value and the market value of a property. The mortgage lending value refers to the current value of a property, from which a security discount is deducted. This value refers to the amount that the bank would receive with certainty in the event of an auction or sale. The market value is the price that would be obtained in the ordinary course of business in accordance with legal requirements and the actual characteristics of the property and its location, without taking into account unusual or personal circumstancesthe mortgage lending value is approximately 80 percent of the market value.
The mortgage lending value is approximately 80 percent of the market value. The following information is required to calculate these values:
- Property size
- Geographical location
- Year of construction
- Living space
- Fixtures
- Income
- Economic remaining useful life
- Land value
- Realized purchase prices of other properties
