You have inherited your parents' house and now face the question: What is the property really worth? This question is crucial not only emotionally but also financially, as the tax office requires a clear answer to calculate inheritance tax. An incorrect valuation can quickly cost you tens of thousands of euros.
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The topic briefly and concisely
The value of an inherited property set by the tax office is often 20-30% too high; obtaining a counter-expertise is your right.
Children have an inheritance tax allowance of €400,000 per parent; the family home used personally can be tax-free under certain conditions.
A professional market value appraisal costs about 0.5-1.5% of the property's value but can often save multiples in taxes.
The death of a parent is a difficult time, further burdened by bureaucratic duties. One of the most urgent tasks is determining the value of the parental home for the tax office. You must report the inheritance within just three months. The tax office uses standardized methods for valuation that often ignore the actual condition of the property and lead to an inflated inheritance tax. Therefore, a professional appraisal is not a luxury but a necessity to make the what is my parental home worth after death process fair and protect your financial interests. This guide shows you how to accurately assess the value and avoid pitfalls.
The legal basis: How the tax office determines the value
Following an inheritance event, the valuation date is always the date of the deceased's death. Based on your inheritance notification, which you must submit within three months, the tax office initiates a valuation process. The legal basis for this is provided by the Valuation Act (BewG) and the Property Valuation Ordinance (ImmoWertV). The issue here: the valuation often takes place on a general basis based on file records, without an on-site inspection. Value-reducing factors such as renovation backlogs or unfavourable room layouts are often not considered. The result is often a market value estimated to be 20 to 30% too high. This discrepancy forms the basis for a potentially excessive tax demand, which you do not simply have to accept. A well-founded counter-expertise is your right. Understanding the differences in valuation is the first step towards reducing your financial burden.
Lodging an Objection: Successfully Challenging the Tax Office Report
The result determined by the tax office is not set in stone. You have the right to demonstrate a lower fair value through a qualified valuation report from an independent expert (§ 198 BewG). Such a report is valid before authorities and courts and can significantly reduce the tax burden. An expert will conduct an inspection and document all relevant characteristics in detail. Even a reduction in value of €50,000 can lower your tax burden by over €5,000. Therefore, the investment in a report usually pays off quickly. It is important to meet deadlines and act proactively. With a precise report, you establish a solid foundation for dealing with the tax office. This ensures that only the actual value of the family home is taxed.
Value Drivers and Detractors: 7 Factors for a Realistic Property Value
To realistically assess the value of your family home, you must know the key factors. An appraiser systematically analyses these points:
Location: Both the macro (city, region) and micro location (immediate neighbourhood, transport links) account for over 30% of the value.
Condition and age: The year of construction provides an initial indication, but the actual condition of the building fabric and any renovations carried out are more decisive.
Energy condition: A poor energy rating (evident in the energy certificate) can reduce the value by up to 15%. The certificate is mandatory when selling or renting.
Features: A contemporary bathroom or modern heating system increases value, while luxury features often only reflect a fraction of the investment.
Maintenance and renovation backlog: Every euro of deferred maintenance reduces the value by more than one euro, as the purchaser factors in the risk. A house in need of renovation requires a precise cost calculation.
Legal circumstances: Registered residential or access rights can reduce the market value by over 20%.
Standard land value: This official value indicates the average land price in the area and is a key component of the valuation.
The analysis of these factors shows why a flat-rate valuation almost always leads to inaccurate results.
Understanding the three official valuation methods according to ImmoWertV
Certified experts use one of three legally standardised methods to determine the market value. The choice depends on the type of property.
The Comparative Value Method
This method is primarily used for condominiums and terraced houses. The expert uses purchase prices from recently sold, very similar properties for this purpose. This method is considered the closest to the market as it is based on real transactions. The data comes from the purchase price collections of local appraisal committees.
The Replacement Cost Method
For owner-occupied single and two-family houses, the replacement cost method is the norm. It answers the question: What would it cost to build the property anew today? The building's construction costs plus the land value, minus any depreciation, are calculated. This method is particularly suitable when there are few comparable properties.
The Income Capitalisation Method
If the parental home is rented out, the income capitalisation method is used. Here, the focus is on the future expected rental income. The value is determined from the land value and the capitalised net income (rental income minus management costs). This method is crucial for investors. A professional appraisal always chooses the appropriate method.
Cost-Benefit Analysis: When a Market Value Appraisal Pays Off
A comprehensive, legally sound market value appraisal costs between 0.5% and 1.5% of the determined property value. For a house valued at €400,000, this corresponds to costs of €2,000 to €6,000. More affordable short appraisals starting at around €500 are useful for an initial orientation but are not recognised by the tax office. Investing in a full appraisal almost always pays off. If the appraisal reduces the value of a €500,000 property by just 15%, you already save €14,250 in inheritance tax at a rate of 19%. The financial leverage is immense. With the Auctoa Inheritance Manager, you can conduct a preliminary data-driven analysis to estimate the potential benefits. This way, you can make an informed decision about how to proceed.
Actively shape inheritance tax through allowances and regulations
The inheritance tax rate depends not only on the property's value but also on your relationship to the deceased. Understanding the exemption thresholds is crucial for tax optimisation.
Spouses & registered partners: €500,000 exemption
Children & stepchildren: €400,000 exemption per child and parent
Grandchildren: €200,000 exemption
Parents & grandparents: €100,000 exemption
All other heirs (e.g. siblings, nieces/nephews): €20,000 exemption
Special rules apply to the family home: If a child inherits the family home and lives in it themself for at least 10 more years, the inheritance can be completely tax-free (up to 200 m² of living space). Moving out before the deadline triggers retroactive taxation. An inheritance tax calculator assists with initial calculations. With these figures, you can strategically plan your next steps.
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Once the value of the parental home is determined, the heirs must make a decision. Each option has far-reaching financial and personal consequences. Selling the property creates quick liquidity and is often the simplest solution for inheritance communities to avoid conflicts. Renting generates passive income, but requires administrative effort and carries risks such as rental defaults. Personal use is often the most obvious emotional choice. However, you must check whether you can afford the ongoing costs of an average of €3-4 per square metre per month. Additionally, if sold within 10 years, capital gains tax may apply. The right decision between selling and personal use depends on your life situation and financial goals.
Conclusion: Avoid costly mistakes with data-driven evaluations
Who determines the value of the house in the event of inheritance?
Initially, the tax office assesses the property based on standardised data. However, as an heir, you have the right to commission your own report from a certified expert to demonstrate a more realistic (often lower) value.
How much does a valuation report for an inherited house cost?
The cost of a legally binding valuation report is freely negotiable, but typically ranges between 0.5% and 1.5% of the property's value. For a value of €350,000, this would be approximately €1,750 to €5,250.
Can I avoid inheritance tax on my parents' house?
Yes, under certain conditions. Children can inherit the house tax-free if the living area is below 200 m² and they immediately occupy it themselves for at least 10 years. Otherwise, personal allowances apply (e.g. €400,000 for children).
What most significantly reduces the value of an inherited property?
The main factors that reduce value are significant renovation and modernisation backlogs, poor energy efficiency, legal encumbrances (such as a right of residence), and an unfavourable location. An appraiser will precisely quantify these deductions.
Which valuation method is used for my parents' house?
The cost approach is used for a typical, owner-occupied single-family home. For flats or terraced houses, the comparative value method is applied, while for rental properties, the income approach is used.
What to do if the community of heirs cannot agree on a value?
If co-heirs cannot come to an agreement, commissioning a neutral arbitration expert is the best solution. Their result is accepted as binding by all parties and prevents lengthy and costly inheritance disputes.
Additional useful links
The Statistische Bundesamt offers tables on house prices and land prices in Germany.
The Bundesministerium der Finanzen provides information on inheritance and gift tax in Germany.
BORIS-D is the central information system of the expert committees for property values and offers standard land values for Germany.
The Deutsche Bundesbank provides an indicator system for the residential real estate market.
The Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) publishes studies on property prices.
The Deutsches Notarinstitut offers information and services related to notarial matters, including real estate law.
At Gesetze im Internet you can find the Valuation Act (BewG), a legal basis for the valuation of assets.
FAQ
Who determines the value of the house in the event of inheritance?
Initially, the tax office assesses the property based on standardized data. However, as an heir, you have the right to commission your own appraisal from a certified expert to demonstrate a more realistic (often lower) value.
How much does a market value appraisal for an inherited house cost?
The costs for a legally binding market value appraisal can be freely negotiated, but typically range between 0.5% and 1.5% of the property's value. For a value of €350,000, this would be approximately €1,750 to €5,250.
Can I avoid the inheritance tax on the parental home?
Yes, under certain conditions. Children can inherit the house tax-free if the living area is less than 200 m² and they occupy it themselves for at least 10 years without delay. Otherwise, the personal allowances apply (e.g. €400,000 for children).
What most significantly reduces the value of an inherited property?
Factors that mainly decrease value include a significant backlog of renovations and modernisations, poor energy efficiency, legal encumbrances (such as rights of residence), and an unfavourable location. An expert will precisely quantify these deductions.
What valuation method is used for my parental home?
The cost approach is applied for a typical, owner-occupied detached house. In the case of condominiums or terraced houses, the comparative value method is used, and for rented properties, the income approach is applied.
What to do if the community of heirs cannot agree on a value?
When co-heirs cannot reach an agreement, appointing a neutral arbitrator is the best solution. Their result is recognised as binding by all parties and prevents lengthy and costly inheritance disputes.
