Have you inherited a flat and are wondering what it's really worth? This question is crucial because the value estimated by the tax authorities can needlessly increase your inheritance tax. Find out how to accurately determine the property's value and reduce your financial burden by up to 30%.
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The topic briefly and concisely
The valuation of an inherited property by the tax office is often a standardised estimate, which can be corrected by a counter-expertise.
There are three main methods for property valuation: the comparison value method, the asset value method, and the income value method, depending on the type of property.
A sale of the property within a year after the inheritance can replace the official valuation with the actual sale price, thereby reducing the tax burden.
Inheriting a property is often accompanied by strong emotions, but it also immediately raises a key financial question: How can the value of the apartment or house be accurately determined? The answer is crucial for you as an heir. It forms the basis for the tax office's calculation of inheritance tax and for a fair division within a community of heirs. An inaccurate or overestimated valuation can quickly lead to a financial burden of several thousand euros. This article presents the three common valuation methods and explains why an independent appraisal is often the key to determining the fair value and saving hard cash.
Why an accurate valuation after inheritance is crucial
If you inherit a property, one of the first actions you need to take is to inform the tax office within three months. Based on the property's value, the amount of your inheritance tax is determined, with allowances reducing the taxable portion depending on the degree of kinship. The value determined by the tax office is often a standardised estimate, which can maximise your tax burden. An accurate valuation of your inherited property protects you from excessive demands and provides a solid foundation for all further decisions, such as a sale or paying out co-heirs. This turns a potential tax trap into a fairly valued asset.
The assessment by the tax office: A standardized approach
The tax office uses simplified, standardised methods for valuation, set out in the Real Estate Valuation Regulation. These methods often inadequately account for individual circumstances, such as a need for renovation or an unfavourable microlocation. Since the Annual Tax Act 2022, valuations have tended to be even higher, potentially increasing the tax burden for heirs by 20-30%. Do not accept this initial assessment without scrutiny. 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 financial valuation basis.
Method 1: The comparative value method for residential properties
The comparison value method is the preferred approach of the tax office for owner-occupied single-family and two-family houses, as well as for condominiums. This involves deriving the value from the actual sale prices of similar properties in the neighbourhood. The data for this comes from the purchase price collections of local expert committees. The following factors are considered for the comparison:
Location of the property (macro and micro location)
Size (living and land area)
Year of construction and structural condition
Features (balcony, garden, garage)
Standard land value
Although it appears market-oriented, this method often ignores details of the specific property that diminish value. An expert can address this to calculate a more accurate value of your property and justify deviations. This is the basis for further action.
Method 2: The asset value method for owner-occupation
If the comparative value method is not applicable due to a lack of suitable properties, the tax office resorts to the asset value method. This method is typical for owner-occupied properties where there is no rental income. It answers the question: What would it cost to rebuild the property exactly as it is today? The value consists of two components: the land value (land reference value x plot area) and the building asset value. From the building asset value, a depreciation for age is deducted, which reflects the loss of value due to wear and tear. An appraiser can here claim additional depreciating factors such as construction defects or a significant maintenance backlog, which often go unnoticed in the general calculation. This way, the market value for the tax office is determined more precisely.
Method 3: The income approach for rented properties
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 expected future rental income. The process is twofold:
Determination of net income: Non-allocatable operating costs (approximately 15-25%) are deducted from the annual cold rent.
Capitalisation: The net income is multiplied by a legally defined multiplier to determine the building value.
In addition, the land value is considered. An advantage for heirs: Only 90% of the determined market value is used for tax calculation on rented properties. A professional appraisal in the event of inheritance can realistically and often set the operating costs higher, further optimising the tax value.
The crucial step: Commissioning a counter-opinion
The standardised valuation by the tax office is an estimate – not the final word. As an heir, you can prove the "lower common value" with a market value appraisal by a certified expert (§ 198 BewG). The costs for such an appraisal range from €1,500 to €3,000, depending on the complexity, but can quickly pay off. Even a reduction of the market value by €50,000 can lower your inheritance tax by up to €15,000. Such an appraisal not only provides a solid basis for negotiation 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 appraiser.
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There is an important exception that can simplify the entire valuation process. If you sell the inherited property to an unrelated person 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 offers an excellent opportunity to refute a potentially overestimated valuation without an expensive appraisal. If you are planning a sale, it is still important to have a realistic valuation in advance to set the right asking price. A checklist for the sale will help you consider all the steps.
Conclusion: Actively work to enforce the fair value
Which valuation method is the best for my inherited flat?
That depends on the type of property. For an owner-occupied flat in a common location, the comparative value method is standard. If it is a rented flat, the income approach 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 everyone involved for the distribution of the inheritance or a possible 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 assess the value of the property even before accepting the inheritance. This is actually advisable to help decide whether to accept or decline the inheritance (e.g., in the case of over-indebtedness). You have six weeks to do this.
What documents do I need for the valuation?
For an accurate valuation, the following documents are important: land register excerpt, declaration of division (in the case of flats), building plans, calculation of living space, energy performance certificate, and if rented, also the current rental agreements and an overview of management costs.
Does a right of residence entered in the land register reduce the value?
Yes, a lifelong right of occupancy or usufruct significantly reduces the market value of the property. The value of the right is capitalised and deducted from the property value, leading to a significant reduction in inheritance tax.
Can I deduct the appraisal costs from taxes?
Yes, the cost of a valuation used to determine the correct inheritance tax can usually be claimed as a deduction in the inheritance tax declaration, thereby reducing the taxable base.
Additional useful links
Bundesfinanzministerium offers comprehensive information on inheritance and gift tax.
Bundesfinanzministerium explains the consistent application of regulations for property valuation in the context of inheritance and gift tax.
Statistisches Bundesamt (Destatis) offers a current press release.
Statistisches Bundesamt (Destatis) provides a glossary entry on the topic of household, 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 building land prices.
Deutsche Bundesbank provides information on the indicator system for the residential property market.
Deutsche Bundesbank publishes an article on the significant decline in residential property prices in 2023 and the increased pressure on rents.
FAQ
Which appraisal method is the best for my inherited apartment?
That depends on the type of property. For an owner-occupied apartment in a common location, the comparative value method is usual. If it's a rented apartment, the income approach 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 the division of the inheritance or a possible sale. In the event of a dispute, the appraisal can also be used in court.
Do I have to accept the inheritance to determine its value?
No, you can get an overview of the property's value even before accepting the inheritance. This is actually advisable in order to make a decision about accepting or renouncing the inheritance (e.g., in case of over-indebtedness). You have six weeks for this.
What documents do I need for the valuation?
The following documents are important for an accurate assessment: land register extract, declaration of division (for apartments), building plans, living space calculation, energy performance certificate, and, if renting, the current rental agreements and an overview of the operating costs.
Does a registered right of residence reduce the property's value?
Yes, a lifelong right of residence or usufruct significantly reduces the market value of the property. The value of the right is capitalised and deducted from the property value, which leads to a significant reduction in inheritance tax.
Can I deduct the cost of the appraisal from my taxes?
Yes, the costs for a valuation report, which is used to determine the correct inheritance tax, can generally be claimed as a liability of the estate in the inheritance tax return, thereby reducing the taxable base.
