Evaluation

Appraisal - An appraisal is a bank’s internal valuation of a property to determine the lien value as part of a lending decision. It determines how much the bank will accept as collateral for a loan. The loan-to-value ratio is typically 10-30% below the market value, as the bank factors in a safety margin to account for market risks. The valuation is decisive for the maximum loan amount, the loan-to-value ratio, and thus for the interest rate terms.

Valuation Process

The bank conducts the valuation using various methods:

1. Data Collection: Property size, living area, year of construction, amenities, location, energy efficiency-based on the borrower’s property documentation
2. Market comparison: Comparison with comparable transactions in the surrounding area (purchase price databases maintained by appraisal committees)
3. Valuation methods: Cost approach (for owner-occupied properties) or income approach (for rental properties)-often supplemented by automated valuation models (AVM)
4. Risk discount: The determined value is reduced by a risk discount → mortgage lending value
5. Determination of the loan-to-value ratio: Ratio of loan amount to mortgage lending value - determines the interest rate terms

Mortgage Lending Value and Loan-to-Value Ratio

Loan-to-Value Ratio	Interest Rate Premium	Meaning
Up to 60%	Best interest rate	First-lien mortgage, low risk
60-80%	+0.1-0.3%	Standard financing
80-90%	+0.3-0.5%	Increased risk, often a premium
Over 90%	+0.5-1.0% or rejection	High risk, not all banks provide financing

Calculation example:

• Purchase price (≈ market value): €400,000
• Loan-to-value (bank’s valuation): €340,000 (15% discount)
• Loan: €300,000
• Loan-to-value ratio: 300,000 / 340,000 = 88% → Interest premium likely

Differences in Valuation Among Banks

Not every bank values properties the same way-and this is precisely where borrowers have significant leverage. Regional banks with in-depth market knowledge use their own appraisers who are familiar with local comparable prices, infrastructure, and neighborhood development. National direct banks and online loan brokers, on the other hand, often work with automated valuation models (AVMs) based on algorithms that frequently fail to fully capture a property’s individual location strengths. This can result in the same property being valued at €360,000 by a regional bank, while a direct bank determines a value of only €310,000-which, for a loan of €300,000, means the difference between a favorable interest rate and a significant interest premium. For prospective buyers in Nuremberg, it is therefore generally advisable to request appraisals from at least one regional bank and one direct bank in addition to your primary bank and to compare the results. If a professional market value appraisal by a certified appraiser is available, this can serve as a basis for negotiation with banks that have undervalued the property.

Practical Tip for Property Owners in Nuremberg and Franconia

Appraisal values vary from bank to bank-it’s worth obtaining multiple offers. Banks with regional expertise in the Nuremberg metropolitan area-including Sparkasse Nürnberg, Sparda-Bank Nürnberg, and VR-Bank Nürnberg-tend to value local properties higher than national banks because they have a better understanding of the market and directly incorporate current data from the Appraisal Committee. Prepare complete property documentation for the valuation: land registry extract, declaration of division (for condominiums), living space calculation according to the German Living Space Calculation Ordinance (WoFlV), current energy performance certificate, photos of all living and ancillary areas, and, if applicable, a current appraisal report. The better the documentation, the higher the valuation will generally be-missing documents lead to flat-rate deductions in automated systems, which a complete dossier can help avoid. For properties in Nuremberg in sought-after locations such as Erlenstegen, St. Johannis, or the Südstadt, a current standard land value from the Appraisal Committee can significantly improve the valuation.

Frequently Asked Questions

Why is the bank’s valuation lower than the purchase price?

The bank does not assess the current market price, but rather the sustainably achievable value based on conservative assumptions-the mortgage lending value. This takes into account that real estate prices can fall, that a distressed sale yields less than a normal market sale, and that market cycles can significantly influence the value. The safety margin is typically 10-20% of the market value. For specialized properties such as historic buildings, purely commercial units, or properties in structurally weak outlying locations, the discount can be significantly higher because the potential for alternative use is lower and the pool of potential buyers would be smaller in the event of a distressed sale.

Can I influence the valuation?

Not directly-the bank makes the decision independently. Indirectly, you can improve the valuation by providing: complete documentation (missing documents result in flat-rate deductions), a current energy performance certificate with a good efficiency class (A or B is viewed positively), proof of completed renovations with invoices and photos, as well as an independent market value appraisal from a certified appraiser that the bank can use as a guide. It’s also worth comparing several banks-the valuation methods, comparative data used, and security discounts can differ significantly, which directly affects the interest rates you can secure.

What happens if the valuation isn’t sufficient for my desired financing?

If the loan-to-value ratio becomes too high, you have several options: contribute more equity to lower the ratio to a more favorable level; bring in a second bank for subordinated financing (significantly more expensive due to higher risk); provide additional collateral, such as another property or securities accounts; or choose a different bank that sets the loan-to-value ratio higher. In some cases, updating the documentation can also help-for example, a professional living space calculation in accordance with the German Living Space Calculation Ordinance (WoFlV) that demonstrates a larger area than the previous estimate, or a current modernization report documenting value-enhancing measures.

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