How is the valuation carried out in real estate

market value

Real estate valuation and market value

Udo Reuss
Tax Expert

Udo Reuss

The tax lawyer and business graduate Udo Reuß is responsible for tax issues at Finanztip. Before that, he worked for various business and specialist publishers such as Handelsblatt, F.A.Z.-Verlagsgruppe, Haufe-Lexware and Vogel Business Media - 14 years of which he worked as editor-in-chief of trade magazines. He draws the relevant judgments for tax savers from the complex tax law.

Since January 1, 2009, the changed regulations on inheritance taxation of houses and apartments have been in effect. Very complicated and bureaucratic legal provisions regulate the inheritance of owner-occupied properties if spouses, registered partners or children continue to live in this property for a certain minimum period of time. So follow this link to expand your knowledge.

The value of inherited real estate is generally to be determined using the market value. Determining the market value of real estate costs time and money. Reports and counter-reports come to different valuations. Example: legal disputes about the amount of the market value due to the location and the structure of the building.

Inheritance tax on rented property

The developed land is valued according to the comparative value method (in particular apartment ownership), the income value method (in particular rented property) or the material value method (especially if no other method leads to the goal), see Section 182 BewG.

Rented real estate is slightly favored because real estate rented for residential purposes is only valued at 90 percent of its value (Section 13c ErbStG). The real estate rented for residential purposes can be located in Germany, in a member state of the European Union or in a state of the European Economic Area.

Apartments rented for residential purposes, which do not count as business assets, are therefore only recorded as market value at 90 percent of their actual value when calculating inheritance tax. Further tax benefits for rented property: The inheritance tax on rented apartments can be deferred for up to ten years without interest at the request of the taxpayer, provided that the inheritance tax can only be paid by selling the residential property. Incidentally, this also applies if the property is used for personal residential purposes after the inheritance.

Since January 1, 2009, real estate has generally been valued at its market value. The Assessment Act contains this in paragraph 176ff. BewG extensive provisions (example: According to § 177 BewG, the common value is to be taken as a basis). In practice, the statements of the Valuation Ordinance are used to calculate the market value of real estate.

Real estate is only valued as required (needs assessment). The assessment is carried out by the tax office at the location where the property is located. The determination of the inheritance tax is of course a matter for the residence tax office. In principle, the capitalized earnings method applies, because the value of the property should be based on the possible income of the property.

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Criteria for determining the market value

The following list shows a very rough summary of valuation principles for determining the market value, as they were primarily used in the past. This list is really only very rough and can therefore hardly be used if there are disputes about the type of valuation of the property and the amount of the property.

  • Undeveloped land: Undeveloped land does not generate any income, so the standard land values ​​of the communal expert committees are used. The guideline value per square meter is multiplied by the size of the property. This method is also used to assess properties without usable buildings.
  • Homes: The local comparison values ​​apply (for example from the local rent index, if available). Due to the larger property sizes compared to apartment houses, a surcharge may be charged for single and two-family houses.
  • Leased properties: 90 percent of the annual net rent excluding heating is taken into account.
  • Factory buildings: Business buildings or other buildings for special use are divided into land and standing buildings.
  • Buildings under construction: The previous production costs are to be added to the property value.
  • Heritable building right: The heritable building right is not part of the property and does not fall under the needs assessment.
  • Minimum value up to December 31, 2008: Due to the location or use of a building, the earnings value determined via the rents can be significantly below the real value of the building. This affects residential areas in very popular parts of the city. For example, anyone who owns one of the few two-family houses with a full view of the Outer Alster at the “Schöne Aussicht” in Hamburg is a candidate for this regulation.
  • Lower value: In individual cases, the inheritance tax debtor can prove that the real (common) value is lower. In practice, this means that the taxpayer hires an appraiser to carry out the valuation. The heir can deduct the costs for the expert opinion from the taxable heir.

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