Market value

Market Value - Market value (also known as fair market value) is the price defined in Section 194 of the German Building Code (BauGB) that a property would fetch in the ordinary course of business as of the valuation date, without taking into account unusual or personal circumstances.

What exactly does market value mean?

Market value serves as the central benchmark for real estate valuation in Germany. Its legal definition is found in Section 194 of the German Building Code (BauGB): According to this, market value is determined by the price that would be realized in ordinary business transactions based on the legal circumstances and actual characteristics, the other qualities, and the location of the property or other object of the valuation, without regard to unusual or personal circumstances.

The key word here is “normal”: The market value does not reflect a collector’s price, but rather the objectively verifiable value that an average market participant would pay. Unusual circumstances such as time pressure, family ties, or speculative expectations are excluded.

The market value plays a decisive role in numerous situations. In real estate sales, it serves as the basis for determining a market-based price. In the event of an inheritance, the tax office requires the market value to calculate inheritance tax. In divorces, it is decisive for the equalization of accrued gains, and in mortgage lending, banks use the market value as the basis for financing. Tax assessments, such as those involving gifts, foreclosures, or expropriations, also rely on the market value.

Three standardized methods are used to determine market value, as regulated by the Real Estate Valuation Ordinance (ImmoWertV): the comparative market analysis, the cost approach, and the income approach. Which method is applied depends on the type of property, the available data, and the purpose of the valuation. In practice, appraisers often combine several methods to achieve a reliable result.

The Three Methods for Determining Market Value

The comparable sales method derives the value from actual purchase prices of comparable properties. It provides the results closest to market value and is preferred for condominiums and land, provided sufficient comparative data is available.

The cost approach determines the value based on the building’s construction costs minus depreciation plus land value. It is typically used for owner-occupied single-family and two-family homes where comparable data is lacking.

The income approach calculates the value based on the sustainable rental income that can be generated. It is the standard method for multi-family homes, commercial real estate, and other investment properties.

The relevant appraisal committees for land values provide market data such as standard land values, property interest rates, and market adjustment factors, which are incorporated into all three methods.

Distinction: Market Value, Mortgage Lending Value, and Purchase Price

In addition to market value, there are other valuation terms that are relevant in practice. The lending value (§ 16 PfandBG) is generally 15-25% below the market value and refers to the sustainable value that a property can reliably secure in the long term-it serves as the basis for bank lending. The actual purchase price may be above or below the market value due to market dynamics, negotiating skills, or emotional factors. And the taxable property value (Section 157 of the Property Tax Act) is determined by the tax office according to its own rules and often deviates significantly from the market value.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, the real estate market has developed in a varied manner in recent years. While neighborhoods such as Erlenstegen, Mögeldorf, or the Old Town have seen stable to rising values, outlying areas sometimes exhibit different dynamics. Anyone wishing to know the market value of their property should first refer to the standard land values published by the City of Nuremberg’s Appraisal Committee. These are updated every two years and are available online.

For a binding market value assessment, we recommend engaging a certified appraiser. Our network of experts supports property owners in Nuremberg and throughout the Franconia metropolitan region with professional appraisals, whether for sale, inheritance, or tax purposes. A professional market value assessment by us as real estate agents is the first free step-it is based on current transaction prices and serves as an excellent foundation for your decision to sell.

Frequently Asked Questions

What is the difference between market value and purchase price?

Market value is a calculated, objective estimate that reflects the price likely to be achieved under normal market conditions. The purchase price, on the other hand, is the actual amount agreed upon between the buyer and seller. Due to supply and demand, negotiation skills, or particular time pressure, the purchase price may deviate upward or downward from the market value. In the Nuremberg market, purchase prices in the years 2018-2022 were in some cases 10-20% above the market value determined by an appraiser.

Who is authorized to determine the market value of a property?

In principle, anyone can perform a valuation. However, for legally binding appraisals-such as those required in court or by the tax office-a publicly appointed and sworn expert or an appraiser certified according to DIN EN ISO/IEC 17024 is required. Real estate agents typically provide market price estimates that serve as a guide but do not replace a formal market value appraisal.

How much does a market value appraisal cost?

The cost of a full appraisal generally ranges between 1,500 and 3,500 euros, depending on the type of property and the amount of work involved. For simpler purposes, such as preparing for a sale, a brief appraisal starting at around 500 euros is often sufficient. Fees are based on the complexity of the valuation and the market value of the property itself. We are happy to offer property owners in the Nuremberg metropolitan area a free initial assessment as part of our real estate consulting services.

How are market adjustment factors and standard land values determined in Nuremberg?

The Appraisal Committee for Property Values in the City of Nuremberg is the authority responsible for publishing standard land values, property interest rates, and market adjustment factors. This market data is derived from actual notarized purchase prices, which notaries are required to report to the Appraisal Committee. Standard land values are updated every two years as of January 1 and are available free of charge via the Nuremberg City Portal and BORIS-Bayern (Standard Land Value Information System). The market adjustment factors published by the Appraisal Committee are an indispensable component for determining the market value of a single-family home or condominium in Nuremberg: They adjust the calculated property value to the price actually achievable on the market. In Nuremberg neighborhoods with high demand-such as Erlenstegen, Johannis, or the Old Town-these factors have recently been above 1.0, meaning that the market value exceeds the property value. In less sought-after outlying areas, the factor may be below 1.0.

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