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Market value appraisals are required for a variety of very diverse objectives. In general, the most probable purchase price under normal market conditions should be determined while excluding personal and unusual circumstances. Where possible, it is determined from the analysis of transactions actually carried out for comparable properties. There is a correlation between the purchase price of a property and the value attributed to it. As early as 1940, Prauser put it this way: "In general, value is understood to be the significance attached to an object, a thing, on the basis of comparative estimation. A comparison requires a yardstick by which the value can be measured. In today's social order, this yardstick is the price that can be obtained for an object in free trade". It should be noted that this is only a fictional price. The purchase price actually agreed to in the end is only the result of the (more or less) rational actions of individual market players and therefore does not have to correspond to the most probable purchase price, the market value.

The most common reasons for a property appraisal include:

•  Purchase •  Sale •  Estate Settlement •  Divorce and the resulting necessity to determine the equalization of gains (community of gains according to § 1363 BGB) •  Asset Allocation •  Appraisals for inheritance and gift tax purposes (§ 198 BewG) •  Tax apportionment of the purchase price into land and building value We prepare national and international value appraisals for all major types of real estate (link to property types). As reliability and quality are of the upmost importance to us, we do not offer short appraisals or automated and/or largely boiler plated text appraisals.

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Since 2013, alternative investment funds (AIF), which include both open-ended and closed-end real estate funds, have been regulated by the German government under the German Investment Act (KAGB). With the introduction of this new regulation, the previously applicable Investment Act has become considerably stricter. The regulations relating to property appraisal are particularly noteworthy with regard to the choice of appraisal methods, the inspection of the properties, and the selection of appraisers.
Section 168 (1) KAGB stipulates that the value of open-ended public investment assets must be determined on the basis of the individual market values of the assets that it is comprised of using the respective statutory or standard market procedures. To ensure a proper, transparent, and independent appraisal, the capital management company must prepare an internal appraisal guideline (§ 169 KAGB). The assets must be valued impartially and with due expertise, care, and diligence. Since a proper appraisal cannot be ensured without a comprehensive property inspection, § 231 KAGB for purchase appraisals and § 239 for standard appraisals stipulate that the inspections must be carried out in person by the appraiser(s) (the number of appraisers depends on the volume of value). The essential criteria for the selection of a suitable appraiser are stipulated in § 216 KAGB. The appraiser must be subject to a legally recognized, mandatory professional registration or legal and administrative regulations or rules of professional conduct, and must provide sufficient professional guarantees to be able to perform the appraisal effectively. Furthermore, the assessment shall not be delegated to a third party.
The appraisal of high-quality, investment-ready real estate is one of our core competencies. For over 25 years, we have been assisting institutional investors as purchase appraisers and standard appraisers, and are also very familiar with the typical processes and requirements necessary to perform efficient appraisals. An up-to-date list of our clients can be found here (link to references). You would like more information on a possible cooperation? We would be happy to provide you with more information about our company and the relevant BaFin documents.

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The mortgage lending value of a property, as defined in section 16 of the German Pfandbrief Act (PfandBG), provides banks with a reliable estimate of the credit risk in real estate financing. This may not be higher than the value "which is determined in the course of a prudent assessment of the future marketability of a property and by taking into account the long-term, sustainable characteristics of the property, normal regional market conditions, and current and possible other uses". The absolute upper limit for the mortgage lending value is the market value. In contrast to the market value, which is intended to reflect the typical purchase price taking into account the current market environment while excluding personal or unusual situations, the mortgage lending value serves as the collateral value from the perspective of the respective financing credit institution. It is intended to ensure during the term of the agreement that any loan that may be defaulted on can be completely redeemed from the proceeds of realization (primarily foreclosure, but also free sale) at any time, which is why potential and expected fluctuations in value in the future must be taken into account in terms of value. For this reason, the market value on the appraisal date must not fall below the mortgage lending value during the entire period of the loan. With our team of experienced, certified mortgage lending value appraisers, we can prepare value appraisals in accordance with § 16 PfandBG that are normally a combined market and mortgage lending value appraisal. Upon request, a mortgage lending value appraisal can also be carried out independently if an adequate, up-to-date market value appraisal is available.

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Who hasn’t heard of the saying "don't put all your eggs in one basket” a phrase commonly attributed to Miguel de Cervantes (1547-1616), or more precisely to Sancho Panza in his novel Don Quixote. This very clear and figurative translation, common to the Anglo-Saxon world, masks the simple but earnest advice: "no aventurarse todo en un día"; one should not dare to do everything in one day. Or stake everything on one card. According to Markowitz (Portfolio Selection, 1952), the best way to achieve this aim is by assembling a diversified (real estate) portfolio. In this case, both the acquisition of individual properties and the acquisition of entire real estate portfolios come into question. If a larger number of properties are traded within a legal transaction, this is referred to as a portfolio transaction, in the course of which the properties are appraised either individually or as a whole - depending on the client's preferences or legal requirements. The classic portfolio appraisal is one of the group appraisal methods (single row calculation), where it is not possible to determine the market value of an individual property. This is partly due to the portfolio-related risk considerations of the market (diversification effects, etc.), which can lead to a deviation between the sum of the individual values and the appraisal of the portfolio as a whole. In return, however, more cost-effective and quickly implementable methods can be used here, such as Pareto, package or group appraisal, random (Monte Carlo) and hedonic methods. A property inspection is generally not carried out, or only randomly. However, it should be noted that the above-mentioned appraisal methods are not legally permissible in many cases. One example is the appraisal of open public investment assets, § 169 (1) KAGB requires the determination of the respective market values and § 231 (2) section 2 KAGB requires the personal inspection by the appraiser. We understand portfolio appraisal to normally mean the appraisal of the commissioned real estate portfolio at the individual property level. A site inspection is mandatory in this case. In addition to a meaningful portfolio overview, you will receive a comprehensive appraisal (§ 194 BauGB) for each property. This means that nothing stands in the way of a separate sale of individual properties. Upon request, we also prepare classic portfolio appraisals. If you have any questions, please contact us!

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An appraisal of land value is normally prepared taking into account the existing state of development. In some cases, however, it may be appropriate to carry out the appraisal on the basis of a future, fictitious use that has already been realized, even though the property is (still) undeveloped on the appraisal date. This is often the case with purchase appraisals for project developments, because the purchase price that requires a plausibility check was agreed to on the basis of the fictitiously completed building (including the land) that is fully rented and/or has rent guarantees.

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In accordance with § 88 of the German Insurance Contract Act (VVG), the insured value is defined as the amount that the policyholder has to pay at the time of the occurrence of the insured event for the replacement or restoration of the insured asset in its new condition, less the reduction in value resulting from the difference between old and new. Unless otherwise agreed in the building insurance contract, the insurance is therefore carried out at current value. In practice, this form of insurance for buildings is rarely used because policyholders are normally interested in restoring the building to its original condition and the costs of restoration or replacement do not usually correspond to the current value before the insured event occurred. For this reason, most insurance contracts are based on reinstatement values or indexed new values (the predominant form of insurance today). Whereas the sum insured under insurance at reinstatement value is based on the originally incurred construction costs of the building structures, insurance at indexed new value also accounts for expected future increases in construction costs. With this form of insurance, there is usually an automatic waiver of underinsurance on the part of the insurer because it is assumed that cost increases that have occurred in the meantime have been adequately recorded and are therefore included in the insurance premium. Indexed new value is defined as the amount to be spent in the event of a claim to produce items of the same type and quality in new condition. It is traditionally expressed as the price stated in Reichsmark as of 1914 (calculated back from today's prices, of course). This seemingly strange procedure has various reasons, which will not be discussed in detail here, but it does not have a negative effect on the settlement of claims. The land value of the property is not taken into account in any of the procedures presented.

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An indication of value is generally understood to be a roughly estimated determination of the value level or a value range on the basis of the documents and information provided by the client and used as a basis without inspection. A site inspection is not or only rarely carried out. In addition, descriptive elements such as a comprehensive description of the location and property are not provided; the emphasis is placed on the computational presentation of the appraisal procedures and the textual documentation of the essential underlying facts. As a result, indications of value can only serve as an orientational guide, e.g. for the initial assessment for purchase or sale considerations or for the preparation of simple asset overviews. The advantages when compared to a full appraisal report are the lower costs and faster processing times. As a rule, value indications cannot be used for complex appraisal properties, especially when value-relevant rights and encumbrances exist or in the case of operator properties that require an intensive examination due to the business management aspects involved.

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Publicly appointed and certified appraisers often play an important role in civil and criminal proceedings as a result of their professional expertise. The §§ 402 ff. ZPO, for example, regulate the evidence to be provided by experts in civil proceedings. Experts working for the court are "appointed" by the court (§ 407 ZPO), a contract under private law is not concluded. Arbitrator's expert opinions are primarily used to have disputed legal or factual issues determined by a neutral third party, essentially to the exclusion of an ordinary court. For this purpose, the parties in dispute conclude a joint agreement to submit to the result of the arbitrator's report (binding effect of an arbitrator's report). Under certain circumstances, arbitrator's expert opinions may be subject to judicial review (§ 317 BGB). This may be excluded within the framework of an arbitration agreement.

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When ground leases are created, the amount of the ground rent to be paid as well as provisions for adjustments over time are normally specified in the ground lease contract. In many cases, however, the contractually agreed upon adjustments are not fully utilized thereafter or are based on incorrect calculations. Often these are due to misinterpretations of what was contractually intended, e.g. because the index series that the contract was originally based on no longer exist or the technical terms used when the contract was concluded decades ago are no longer understood today. Property appraisers are therefore called upon to assess the appropriateness of the ground rent currently paid and to adjust it during the course of the appraisal should it be deemed necessary. See also: Gilich, Tobias; Simon, Thore: Adjustment of ground rents after discontinuation of the indices for the gross monthly earnings of white-collar and blue-collar workers in the manufacturing sector. Cf.: Grundstücksmarkt und Grundstückswert (GuG), Issue 2, 2008, pp. 99-101

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As a matter of principle, appraisal reports cannot claim to be absolute, as they are based on the interpretation and assessment of the value-determining factors identified by the appraiser. An appraisal report is instead a comprehensive (appraisal) assessment of the facts, taking into account the most likely assessment by the real estate market. For this reason, an appraisal of the same property by two experts is not necessarily expected to produce identical results (although this is also possible), without the respective values themselves being subject to doubt. In some cases, however, a professional review of a third-party appraisal opinion may be appropriate, e.g. if there are doubts about the objectivity or neutrality of the executing appraiser or if the reasons given in the appraisal report are not comprehensible (which does not automatically lead to the conclusion that the appraisal is inaccurate).

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In contrast to a full appraisal report, an appraisal opinion is a factually sound assessment of only one individual aspect of an appraisal problem. More rarely, several issues are dealt with together, although in both cases there is no classification in a larger overall context. For example, the determination of the appropriate and legally permissible ground rent is also an appraisal opinion because the influence of the determined ground rent on the market value of the ground lease or the leasehold property does not take place (lack of classification in the overall context). Our appraisal opinions are normally prepared in essay or letter form and are thus additionally distinguished from the more formalized full reports.

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The basis of any appraisal is the prevailing value conditions of the property market. Essential prerequisites for their reliable analysis and assessment are, in addition to extensive market knowledge and experience on the part of the appraiser, access to current, valid market data. Thorough market research forms the basis for the derivation of reliable appraisal parameters and a comprehensible appraisal. It should therefore include statements on the general economic conditions, the conditions on the rental and investment markets, as well as the competitive situation.

Our office has its own extensive databases with current market and transaction data that are supplemented by other national and international databases (including Property Market Analysis (PMA), Real Capital Analytics (RCA), IZ-Research, BIIS-Research). In addition, our office is also involved in the further development of several research platforms. Extensive market research is a core component of our appraisals. We also prepare research reports as a separate service.