Selling a property is not only a challenge because of the current market situation. Those who want to sell read about rising prices on real estate portals, while there is talk of falling prices in publications by the expert committees. An apparent contradiction that can irritate real estate sellers and fuel unrealistic price expectations. The German Real Estate Association (IVD) provides an overview of terms that are crucial for the sale of a property – good to know, of course, also for prospective buyers.
1. Offer price
The asking price refers to the initially fixed price at which a seller offers his property for sale. This price can be based on various factors such as the location, the condition of the property, the current market environment and the comparable selling prices of similar properties. If a market value has been determined beforehand, the asking price can be determined based on the calculated value. However, it is important to remember that the asking price is often the seller’s wishful thinking.
2. final prize
The closing price (often referred to as the selling price) of a property is the actual price at which the property is ultimately sold. This price can deviate from the original offer price and the market value and is determined by individual negotiations between buyer and seller. Various factors such as the financial situation of both parties, the additional consideration of individual wishes regarding contract modalities and other subjective influences can affect the final price in addition to the objective criteria. The closing price is ultimately the amount that is recorded in the purchase contract.
3. Fair Value/Market Value
The market value, also known as the market value, describes the objective value of a property and is regulated according to Section 194 of the Building Code (BauGB). According to this, it is the price “at the point in time to which the determination relates, in the ordinary course of business according to the legal circumstances and actual properties, the other properties and the location of the property or other object of the valuation without regard to unusual or personal relationships could be achieved”.
The market value can be determined by an expert in a valuation process based on a thorough analysis of the factors mentioned in the regulation and can serve as an objective basis for transactions. “The market value is also relevant for many legal issues for courts, for example when determining the equalization of gains in the context of divorce or in the case of asset transactions that are subject to the approval of a guardianship court. The market value is also often used to organize an agreement between heirs or several owners,” says Sven Keussen, Chairman of the Federal Specialist Committee for Brokers at the IVD. Christian Gorber, Chairman of the Federal Technical Committee for Experts at the IVD, adds: “According to the Valuation Act, a lower valuation within the scope of inheritance and gift tax can also be proven with the market value appraisal of a qualified expert. Due to the changes in the tax assessment of real estate introduced with the Annual Tax Act 2022, this will be much more worthwhile for taxpayers in the future.”
The market value (market value) can usually be determined using one or more of the three standardized methods: real value method, comparative value method, income value method. In the real value method, the land value and the building value are first determined separately. The value of the structures is then reduced by the reduction in age. The addition of both values then results in the provisional material value. This is then adjusted to the demand situation prevailing on the reporting date using market adjustment factors. If necessary, other special features, such as any construction defects, can then be taken into account in a last step. This method is well suited to determine the market value of single or two-family houses. In contrast to the real value method, the comparative value method uses the sales prices of properties that are in a similar condition, in a similar location and have comparable furnishings. The procedure is particularly suitable for condominiums and undeveloped land, provided that there are sufficient suitable comparative cases. Any special features or deviations must be considered separately. In the capitalized earnings method, the value of the property and the earnings value of the building.
Source: press release IVD