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how do I calculate the value of an inherited property
You have inherited a property and are wondering: What is it really worth? This question is crucial because an incorrect valuation can cost you thousands of euros in taxes or lost profit. We guide you through the official valuation methods and show you how to determine the realistic market value.
With access to Google, BORIS, and Deep Research.
The property value determined by the tax office is often too high as it is based on generalized data without an on-site inspection; a counter-valuation can reduce inheritance tax.
There are three official valuation methods: the comparative value method for standard properties, the intrinsic value method for unique objects, and the income value method for investment properties.
Important value factors include location, condition of the building, energy efficiency, layout, and legal burdens such as a registered right of residence.
An inherited property presents many heirs with a significant challenge. It is often unclear how to calculate the value of an inherited property, leading to uncertainty regarding the tax office and potential buyers. The value assessed by the tax office is often based on standardised methods and can exceed the actual market value by 15-20%. However, an accurate knowledge of the property's value is the basis for all further decisions: the distribution among heirs, the amount of inheritance tax, and setting a fair selling price. This guide explains the three official valuation methods and helps you make an informed, data-driven decision.
After an inheritance event, the tax office contacts you and requests an inheritance tax declaration. To calculate the tax, the authority determines the so-called common value (market value) of the property. This is usually done through standardized mass procedures based on general data from evaluation committees. An on-site visit usually does not take place.
Individual characteristics such as a backlog of renovations, an unfavorable layout, or legal burdens are often not taken into account. The result is often an overestimated value that unnecessarily increases your tax liability. However, you have the right to demonstrate a lower, more realistic value through a qualified appraisal. How you determine the market value for the tax office is therefore a crucial first step. Next, we will consider the methods that are recognized for accurate valuation.
The Immobilienwertermittlungsverordnung (ImmoWertV) regulates three nationwide uniform procedures for determining market value. The choice of method depends on the nature and use of your inherited property. Using the wrong method can lead to significant discrepancies.
The Comparison Value Method: The Market Decides
This method is best suited for owner-occupied standard properties such as condominiums or single-family homes in estates. The value is derived from the actual sales prices of recently sold, similar properties in comparable locations. The data for this comes from the purchase price collections of local appraisal committees. This method is considered the most market-oriented, as it directly reflects current market activity.
The Cost Value Method: What Does New Construction Cost?
For unique or owner-occupied properties, for which there are hardly any comparable objects, the cost value method is applied. It adds the land value (determined through the standard land value) and the building's construction costs. An age-related depreciation is subtracted from the construction costs, often amounting to 1% to 1.5% per year. A comprehensive evaluation of the inherited house also considers the condition of the building's substance here.
The Income Value Method: Focus on Yield
If you inherit a rented property, the income value method is the right choice. Here, the focus is on the future expected rental income. The land interest is deducted from the annual net income (gross annual rent minus management costs of around 20-25%) and the result is capitalised. This method is crucial for investors evaluating long-term returns. Once the methods are clear, the specific characteristics of the property that significantly influence the value must be analysed.
Regardless of the valuation method, specific characteristics determine the final market value of your inherited property. A thorough analysis of these points is essential to accurately calculate the value. A good energy performance can increase the sale price by up to 25%.
Here are the five most important influencing factors:
Location, location, location: The macro location (city, region) and micro location (immediate neighbourhood, noise pollution) are the biggest value drivers. Good connectivity can increase the value by 20%.
Condition and fittings: A high backlog of renovations, outdated building services or worn-out fittings can significantly reduce the value. On the other hand, a bathroom renovation can increase the value by 5-10%.
Energy condition: An energy certificate is mandatory. Properties with a good energy efficiency rating (e.g. A or B) achieve significantly higher prices than unsanitary old buildings with a rating of G or H.
Layout and plot: A modern, open layout is more desirable than many small, dark rooms. The size and usability of the plot also play a role, as in plot valuation in the event of inheritance.
Legal circumstances: Encumbrances in the land register such as a lifelong right of residence or a right of way for the neighbour can reduce the market value by 30% or more.
These factors show that a purely online valuation is often insufficient. The question arises: is your own research enough or do you need a professional appraisal?
For initial guidance, you can use free online tools. These often provide a rough estimate of prices within minutes. However, bear in mind that these calculators can have an error margin of up to 15%, as they cannot take individual specifics into account. Another option is to research the BORIS-D land value information system, which displays official land value rates free of charge.
A qualified market value appraisal by an expert is indispensable in the following cases:
For submission to the tax office: If you want to dispute the value set by the authority and save on inheritance tax.
In the case of co-heirs: To create a fair and transparent basis for payouts or division and to avoid disputes.
For the sale: To set a realistic and market-appropriate asking price and conduct negotiations confidently.
The costs for such an appraisal usually range between 0.5% and 1.5% of the property's value, but they are a worthwhile investment. Unsure which route is right for you? The Auctoa Inheritance Manager analyses your situation and gives a clear recommendation. Or chat now for free with our ImmoGPT to get an initial assessment. This provides you with a solid foundation for the next steps.
The question "How do I calculate the value of an inherited property?" cannot be answered with a simple formula. The value depends on the type of property, its usage, and numerous individual factors. Do not rely on the tax office's general estimate, which can quickly cost you several thousand euros. Use the recognized valuation methods – comparison value, intrinsic value, or income value method – to create a realistic basis.
Investing in a professional valuation by experts protects you from expensive mistakes and provides the necessary security for negotiations. Whether for taxes, the community of heirs, or a sale: an accurate, data-supported valuation is your most powerful tool for making a financially optimal decision.
The Federal Ministry of Finance provides information on inheritance and gift tax.
The Federal Ministry of Finance offers an article on the application of valuation regulations for real estate in the context of inheritance and gift tax.
The Federal Ministry of Finance provides an excerpt from the Valuation Act (BewG) §182 on the valuation of developed land for inheritance tax purposes.
The Federal Statistical Office (Destatis) publishes a press release.
The Federal Statistical Office (Destatis) offers information on construction prices and real estate price indices.
Gesetze im Internet provides the Regulation on the Determination of Market Values for Real Estate (ImmoWertV 2022).
Gesetze im Internet includes § 194 of the Building Code (BauGB) for the definition of market value.
The Deutsche Bundesbank offers its indicator system for the housing market.
Wikipedia provides an article on property valuation.
What documents do I need for property valuation?
For a professional valuation, you typically need a current land register excerpt, the cadastral map, building plans (floor plans, sectional drawings), the calculation of living space, the energy certificate, and for rented properties, the rental agreements and a statement of operating costs.
What is the difference between market value and standard value?
The market value (or market price) is the amount that could currently be achieved in a sale in the market. The standard value is an outdated fiscal assessment basis that was replaced by the market value for inheritance tax purposes in 2009.
How does a right of residence affect property value?
A lifelong right of residence registered in the land register significantly reduces the market value because the property is not or only partially usable for a new owner. The depreciation can amount to 20% to 50% of the unencumbered value, depending on the age of the entitled person.
How long does a market value appraisal take?
The preparation of a complete, legally secure market value appraisal by an expert usually takes between three and six weeks after the site inspection and submission of all necessary documents.
Do I have to tax the full value of a rented inherited apartment?
No, the legislator grants a valuation reduction of 10% for properties rented for residential purposes. This means that only 90% of the determined market value is used for calculating inheritance tax.
What happens if the property is quickly sold after valuation?
If you sell the property promptly after the inheritance at a price below the value estimated by the tax office, you can submit this lower sale price as evidence of the lower common value to the tax office. This can reduce the tax burden.
