You have inherited a property and are wondering: What is it really worth? This question is crucial, as an incorrect valuation could 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.
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The topic briefly and concisely
The property value determined by the tax office is often too high because it is based on general data without an on-site inspection; a counter-appraisal can reduce inheritance tax.
There are three official valuation methods: the comparative method for standard properties, the cost approach for unique objects, and the income approach for investment properties.
Important value factors include location, construction condition, energy efficiency, layout, and legal encumbrances such as a registered right of residence.
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 with the tax office and potential buyers. The value assessed by the tax office is often based on general procedures and can exceed the actual market value by 15-20%. However, a precise knowledge of the property value is the foundation for all subsequent decisions: the division within a community of 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.
The Crux with the Official Appraisal: Why the Tax Office's Assessment is Often Too High
After an inheritance, the tax office contacts you and requests an inheritance tax return. To calculate the tax, the authority determines the so-called common value (market value) of the property. This usually happens through standardized mass procedures based on general data from expert committees. An on-site inspection does not usually take place.
Individual features such as renovation backlogs, an unfavourable room layout, or legal burdens are often not taken into account. The result is often a value set too high, unnecessarily increasing your tax burden. 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 look at the methods that are recognized for a precise evaluation.
The three official methods of valuation in detail
The Immobilienwertermittlungsverordnung (ImmoWertV) uniformly regulates three methods nationwide for determining the market value. The choice of method depends on the type and use of your inherited property. An incorrect method can lead to significant discrepancies.
The Comparative Value Method: The Market Decides
This method is best suited for standard residential properties used by the owner, such as condominiums or single-family homes in settlements. The value is derived from the actual sales prices of recently sold, similar properties in comparable locations. The data for this is sourced from the purchase price collections of local expert committees. This method is considered the closest to the market, as it directly reflects the current market activity.
The Capitalised Income Method: Focus on Return
For unique or owner-occupied properties, for which there are hardly any comparable objects, the asset value method is applied. It adds the land value (determined via the standard land value) and the construction costs of the building. An age-related depreciation is deducted from the construction costs, which is often 1% to 1.5% per year. A comprehensive evaluation of the inherited house also takes the condition of the building fabric into account.
The Income Approach: Focus on Yield
If you inherit a rented property, the income approach is the right choice. Here, the future expected rental income is the main focus. From the net rental income (gross annual rent minus management costs of approximately 20-25%), the interest on land value is deducted and the result is capitalised. This method is crucial for investors who assess the long-term return. Once the methods are clear, the specific characteristics of the property that significantly influence the value must be analysed.
Value Drivers and Value Detractors: You Need to Know These 5 Factors
Irrespective of the valuation method, specific characteristics determine the final market value of your inherited property. An accurate analysis of these aspects is essential for correct valuation. 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 Features: A high backlog of repairs, outdated building technology, or worn-out features can significantly reduce the value. On the other hand, refurbishing a bathroom can increase the value by 5-10%.
Energy Condition: The energy certificate is mandatory. Properties with a good energy efficiency class (e.g., A or B) fetch considerably higher prices than unrenovated older buildings with class G or H.
Floor Plan and Plot: A modern, open floor plan is more sought after than many small, dark rooms. The size and usability of the plot also play a role, as in the property valuation in the case of inheritance.
Legal Conditions: Encumbrances in the land register, such as a lifetime residency right 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 not sufficient. The question arises: Is your own research enough, or do you need a professional appraisal?
Do it yourself or hire a professional: Which path is right for you?
For an initial orientation, you can use free online tools. These often provide a rough estimate of the price within minutes. However, keep in mind that these calculators can have an error rate of up to 15% as they cannot capture individual peculiarities. Another option is to research in the Bodenrichtwertinformationssystem BORIS-D, which displays the official land reference values for free.
A qualified market value appraisal by an expert is indispensable in the following cases:
For submission to the tax office: If you wish to refute the value set by the authority and save inheritance tax.
In heir communities: To create a fair and transparent basis for payouts or distribution and avoid disputes.
For sale: To set a realistic and market-oriented asking price and conduct negotiations with confidence.
The cost for such an appraisal is usually between 0.5% and 1.5% of the property's value, but it is a worthwhile investment. Not sure which path is right for you? The Auctoa Inheritance Manager analyses your situation and provides a clear recommendation. Or chat for free now with our ImmoGPT to get an initial assessment. This gives you a solid foundation for the next steps.
Conclusion: A data-driven evaluation is your key to success
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 use, and numerous individual factors. Do not rely on the general estimate from the tax office, which can quickly cost you several thousand euros. Use the recognised valuation methods – comparative value, intrinsic value, or income value methods – to establish a realistic basis.
Investing in a professional valuation by experts protects you from costly mistakes and gives you the necessary confidence for negotiations. Whether for tax, the community of heirs, or sale: A precise, data-driven valuation is your strongest tool for making a financially optimal decision.
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Additional useful links
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 within the framework of inheritance and gift tax.
The Federal Ministry of Finance provides an excerpt from the Valuation Act (BewG) §182 on the valuation of developed properties 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.
The Laws in the Internet provides the ordinance on the determination of the market values of real estate (ImmoWertV 2022).
Laws in the Internet includes § 194 of the Building Code (BauGB) for the definition of market value.
The German Bundesbank offers its indicator system for the residential real estate market.
Wikipedia provides an article on land valuation.
FAQ
What documents do I need for the property valuation?
For a professional assessment, a current land register extract, the cadastral map, construction plans (floor plans, sectional drawings), the calculation of living space, the energy performance certificate, and, for rented properties, the rental agreements as well as a statement of management costs are typically required.
What is the difference between market value and standard value?
The market value (or market price) is the price that could currently be achieved in a sale on the market. The unit value is an outdated fiscal assessment basis that has been replaced by the market value for inheritance tax since 2009.
How does a right of residence affect the value of a property?
A right of residence registered in the land register for life significantly reduces the market value, as 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, court-proof market value appraisal by an expert usually takes between three and six weeks after the on-site appointment and the handover of all necessary documents.
Do I have to pay tax on the full value of an inherited rented apartment?
No, for properties rented out for residential purposes, the legislature grants a valuation discount of 10%. This means that only 90% of the determined market value is used for the calculation of inheritance tax.
What happens if the property is sold quickly after the valuation?
If you sell the property shortly 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 reduced market value to the tax office. This can reduce the tax burden.
