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Inherited an apartment: how to determine its value
Have you inherited a flat and are wondering what it's really worth? This question is crucial, as the value estimated by the tax office can unnecessarily increase your inheritance tax. Discover how to accurately determine the property's value and reduce your financial burden by up to 30%.
With access to Google, BORIS, and Deep Research.
The valuation of an inherited property by the tax office is often a standardized estimate that can be corrected by a counter-expertise.
There are three main methods for property valuation: the comparative value method, the intrinsic value method, and the income value method, depending on the type of property.
A sale of the property within one year after the inheritance can replace the official appraised value with the actual sale price and thus reduce the tax burden.
Inheriting a property is often associated with strong emotions, yet it also immediately raises a central financial question: How can the value of the flat or house be accurately determined? The answer is crucial for you as an heir. It forms the basis for the calculation of inheritance tax by the tax office and for a fair distribution within a community of heirs. An inaccurate or overly high estimate can quickly lead to an additional financial burden of several thousand euros. This article presents the three common valuation methods and explains why an independent appraisal is often key to determining the fair value and saving real money.
If you inherit a property, one of the first official actions is to report it to the tax office within three months. The amount of your inheritance tax is determined based on the value of the property, with allowances that reduce the taxable portion depending on the degree of kinship. The value determined by the tax office is often a standardised estimate that can maximise your tax burden. An accurate valuation of your inherited property protects you from excessive demands and provides a solid basis for all further decisions, such as a sale or payouts to co-heirs. This way, a potential tax trap becomes a fairly valued investment.
The tax office uses simplified, flat-rate methods for valuation, as outlined in the Real Estate Valuation Ordinance. These methods often inadequately consider individual characteristics, such as impending needs for renovation or an unfavourable micro-location. Since the Annual Tax Act 2022, the valuations have tended to be even higher, which can increase the tax burden for heirs by 20-30%. Do not accept this initial assessment without verification. You have the right to demonstrate a lower, more realistic value through a qualified appraisal, thereby reducing your inheritance tax. This proactive step is crucial for establishing a realistic basis for financial valuation.
The comparative value method is the preferred approach of the tax office for owner-occupied single and two-family houses as well as for condominiums. Here, the value is derived from the actual purchase prices of similar properties in the neighbourhood. The data for this comes from the purchase price collections of local assessment committees. The following factors are considered for comparison:
Location of the property (macro and micro location)
Size (living area and plot size)
Year of construction and structural condition
Features (balcony, garden, garage)
Standard land value
Although it appears market-oriented, this method often ignores devaluing details of the specific property. An expert can address this to calculate a more accurate value of your property and explain any discrepancies. This forms the basis for further actions.
If the comparative value method is not applicable due to a lack of suitable objects, the tax office resorts to the tangible value method. This procedure is typical for owner-occupied properties where rental income does not occur. It answers the question: What would it cost to reconstruct the property exactly as it is today? The value consists of two components: the land value (land valuation rate x plot area) and the building’s tangible value. An age-related depreciation is deducted from the tangible value of the building, reflecting the loss of value due to wear and tear. An expert can also claim additional depreciating factors such as construction defects or significant maintenance backlogs, which are often overlooked in standard calculations. This makes the market value for the tax office more precisely determined.
If you inherit a rented apartment or a multi-family house, the potential income is the focus. The income approach calculates the value based on the rental income expected in the future. The process is twofold:
Determination of net income: Non-allocable operating costs (around 15-25%) are deducted from the annual cold rent.
Capitalisation: Net income is multiplied by a legally specified multiplier to determine the building value.
Additionally, the land value is considered. An advantage for heirs: For tax purposes, only 90% of the determined market value of rented properties is used. A professional appraisal in the event of inheritance can realistically and often assess the operating costs higher, further optimising the taxable value.
The standard valuation by the tax office is an estimate – not the final word. As an heir, you can demonstrate the 'lower common value' with a market valuation report from a certified expert (§ 198 BewG). The costs for such a report range between €1,500 and €3,000, depending on complexity, but can quickly pay off. Even a reduction in market value by €50,000 can lower your inheritance tax by up to €15,000. Such a report not only provides a solid basis for negotiations with the tax office but also clarity for the community of heirs. Do you need a quick, data-based assessment? The Auctoa ImmoGPT chat can give you an initial orientation before you commission an expert.
There is an important exception that can simplify the entire evaluation process. If you sell the inherited property to a third party within one year of inheritance, the notarised sale price is considered the new market value for the tax office. If this price is below the value estimated by the tax office, your tax burden will be adjusted downwards accordingly. This regulation provides an excellent opportunity to refute a potentially overestimated valuation without an expensive appraisal. If you are planning a sale, a realistic valuation in advance is still important to set the correct asking price. A checklist for the sale helps you consider all the steps.
If you inherit a property, the valuation is the crucial lever to manage your financial obligations. Do not rely solely on the tax office's blanket estimate, which can quickly cost several thousand euros too much. Analyse which of the three valuation methods applies, and always consider an independent expert opinion in case of discrepancies. The Auctoa Inheritance Manager can guide you through this complex process. A well-founded valuation is your strongest tool for financial fairness and security.
Bundesfinanzministerium offers comprehensive information on inheritance and gift tax.
Bundesfinanzministerium explains the consistent application of regulations for the valuation of real estate in the context of inheritance and gift tax.
Statistisches Bundesamt (Destatis) provides a current press release.
Statistisches Bundesamt (Destatis) presents a glossary entry on the topic of home, real estate, and property wealth.
Statistisches Bundesamt (Destatis) delivers information on construction prices and real estate price indices.
Statistisches Bundesamt (Destatis) offers tables on house and land prices.
Deutsche Bundesbank provides information on the indicator system for the residential real estate market.
Deutsche Bundesbank publishes an article on the significant decline in residential property prices in 2023 and the increased pressure on rents.
Which valuation method is best for my inherited apartment?
That depends on the type of property. For an owner-occupied condominium in a common location, the comparative value method is typical. If it is a rented apartment, the income value method is crucial, as it focuses on rental income.
What happens if the community of heirs cannot agree on the value?
If the co-heirs cannot agree, a neutral market value appraisal is the best solution. It provides an objective and comprehensible basis for all parties involved to distribute the inheritance or for a potential sale. In case of dispute, the appraisal can also be used in court.
Do I have to accept the inheritance to determine the value?
No, you can obtain an overview of the property's value even before accepting the inheritance. This is advisable to make a decision about accepting or renouncing the inheritance (e.g., in case of over-indebtedness). You have six weeks to do so.
What documents do I need for the valuation?
For accurate valuation, the following documents are important: land register extract, declaration of division (for apartments), building plans, calculation of living space, energy certificate, and if renting, also the current rental agreements and an overview of operating costs.
Does a right of residence registered in the land register reduce the value?
Yes, a lifelong right of residence or usufruct significantly reduces the property's market value. The value of the right is capitalized and deducted from the property's value, which leads to a considerable reduction in inheritance tax.
Can I deduct the appraisal costs from taxes?
Yes, the costs for a valuation report, which serves to determine the correct inheritance tax, can generally be claimed as a deductible liability in the inheritance tax declaration, thus reducing the taxable base.
