Valuation methods at a glance: The asset value method

In the asset value method, the land value is determined separately from the value of the property built on it. The final market value is obtained by adding the two values. This method is used in particular for owner-occupied single-family and two-family houses.

The land value is generally determined on the basis of the comparative value method with the aid of data from the local appraisal committee. The building value calculated using the asset value method is based on the cost of constructing or restoring the building (asset value). Among other factors, the size of the living space, the quality of the construction, and the presence and condition of outdoor facilities such as garages, terraces and gardens are included in the analysis.

This methodology is based on the construction costs that would be incurred if the building were to be rebuilt in this form. For these construction costs, the experts can refer to special tables. The following applies: The construction costs of a mid-terrace house are on average lower per square meter than for a detached single-family house.

The degree of wear and tear and the remaining useful life of the property are derived from this value. Experts generally assume a total useful life of 80 years for a residential property. For each year a building has on the hump, a reduction in value of 1.25 percent of the determined building value is deducted. Example: If the construction costs were calculated at 170,000 euros and the property is 15 years old, the value is reduced by around 31,900 euros to 138,100 euros.

This automatic loss of value can be "stopped" by comprehensively modernizing the property. If, for example, a Gründerzeit house is comprehensively renovated and equipped with modern technology (heating system, windows, balconies), then it has the quality of a new building again.

Value-reducing factors such as renovation backlogs or defects such as damp cellars are also taken into account. Finally, the market adjustment factor is used in the asset value method. This factor is used to take into account the demand for this type of property. After all, a condominium in a structurally weak small town will have a lower market value than the same residential unit in a large city with high demand.

Do you want to have your house valued using the asset value method? Contact us now.

Photo: urfinguss

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