Terms from property valuation explained in an understandable way

An association of engineering and architectural bodies issuing guidelines for project management and remuneration. The publications serve as practice standards complementing HOAI but are not legally binding.

Short for the Federal Office for Economic Affairs and Export Control. BAFA administers programmes supporting energy efficiency, external trade and economic development, including grants and loans for energy refurbishment, new builds or accessibility.

Building damage refers to visible or hidden defects in building components caused by material faults, water ingress, structural deficiencies or external impacts. It can impair safety, functionality and value. A qualified damage analysis is essential for planning remediation.

The balance sheet value is the value of a property recorded in a company’s accounts. It often differs from market value because it is based on historical acquisition or production costs. Revaluation may be required during audits.

Contaminated sites are soil or building contaminations from past uses. Authorities maintain registers documenting known or suspected sites. Contamination can entail significant remediation costs and restrict use or development; owners are often obliged to remediate. Evidence or suspicion typically reduces land value.

The notarised agreement between buyer and seller on transfer of ownership of a property. It is required for the entry of the new owner in the land register and thus legally essential to complete a property purchase.

Construction defects are deviations from the contractually owed condition in new builds or refurbishments. They can affect function, safety or appearance. Early detection helps avoid consequential damage.

Construction acceptance is the formal determination that construction services have been performed in accordance with the contract. With acceptance, responsibilities transfer to the owner and warranty periods start. Defects must be documented at acceptance and, if applicable, remedied within the specified period.

The cadastral map shows official boundaries, parcels and building footprints. It is part of the cadastre and serves as a planning and evidentiary basis in property transactions. Current maps are available from the local cadastre office.

The cost approach is a standardised method to determine a property's value, especially for owner-occupied or hard‑to‑compare assets. It is based on replacement cost of the building minus depreciation plus land value. Commonly used for single‑family homes without income focus.

Under this approach, the market value of a plot is derived from the actual purchase prices of other properties. A prerequisite is that location, use, soil conditions, layout and other characteristics correspond to those of a comparable property.

The condition assessment documents the structural condition of a property at a specific point in time. It is often used as evidence preservation before construction measures or prior to resale. The documentation of the condition assessment includes photos, records and brief evaluations.

Depreciation (AfA) allocates acquisition or production costs of a building over its useful life, recognising annual value loss for tax purposes and reducing taxable income. Linear and degressive methods may apply under specific legal conditions.

DGNB is the German Sustainable Building Council. Its certification assesses quality across technology, ecology and economy, providing guidance for sustainable planning, construction and operation.

DIN refers to the German Institute for Standardization, an independent platform for national and international standards. Where incorporated into contracts or mandated by law, DIN standards become binding and serve as recognised rules of technology.

The declaration of division regulates the partition of a multi‑unit building into separate freehold flats and parts of common property. It defines separate and common property as well as voting rights. Buyers should carefully review any declaration of division before acquisition.

Depreciation (value reduction) describes the decrease in market value due to ageing, wear and tear or damage. In valuation it is reflected through depreciation or age‑related value reduction. Refurbishments can partially offset a depreciation.

An energy performance certificate documents a building’s energy quality. It states demand or consumption values and must be presented upon sale or letting. There are demand‑ and consumption‑based certificates with different methodologies.

Energy efficiency expresses the ratio of energy input to useful output in a building. High efficiency reduces operating costs and CO₂ emissions. Measures such as insulation and modern heating technology significantly improve efficiency.

ESG stands for Environmental, Social and Governance and denotes sustainability criteria increasingly used in investment and valuation. It includes energy efficiency, social aspects such as accessibility and transparent corporate governance, and is gaining importance due to regulation and investor demand.

Funding refers to public grants or low‑interest loans for energy refurbishment, new builds or accessibility. Programmes are offered, for example, by KfW or BAFA. Qualified advisory helps identify and apply for suitable funding.

HOAI is Germany’s fee schedule for architects and engineers and regulates remuneration for engineering and architectural services.

A heat pump uses environmental heat from air, water or ground to heat buildings. It operates efficiently, especially in combination with underfloor heating. Funding programmes support installation.

The income approach is used to value income‑producing properties such as rental houses or commercial assets. It capitalises sustainable net income after operating costs; the capitalisation rate is a key driver.

KfW is Germany’s state development bank, promoting energy‑efficient construction and refurbishment via low‑interest loans and grants. Eligible measures must meet technical minimum requirements.

The land register is a public record documenting property ownership and encumbrances. Consulting it is essential for any property purchase to ensure legal clarity and avoid hidden burdens.

Lease (pacht) is a reciprocal contract under which the lessor grants the lessee the right to use an asset (e.g. plot, allotment, building) for the duration of the lease. The lessee pays a regular lease fee, similar to rent, for the use.

The living area comprises all rooms within a flat or house that are used for residential purposes. These include bedrooms, kitchen, living room, corridors, storage rooms within the flat, balconies, terraces, loggias and stairs within the rented area, but not, for example, cellars or technical rooms. The calculation of living area is carried out according to the German Living Area Ordinance (WoFlV).

The mortgage lending value is the long‑term sustainable value of a property used by banks to secure loans. It ignores speculative upside and typically lies below market value.

Market analysis assesses supply, demand and price levels in a defined real estate market. It serves to position an asset relative to similar properties and is important for investment decisions and location assessments.

The market value is the estimated price a property would achieve under normal market conditions at the valuation date. It forms the basis of many appraisals, e.g. for sale, inheritance or divorce. The market value is determined pursuant to Section 194 of the German Building Code (BauGB) on the basis of objective criteria such as location, condition and use.

Operating costs are expenses (e.g. heating, water, apportioned charges) incurred in addition to net rent and must be considered as additional, partly consumption‑based costs in letting or leasing.

A public-law encumbrance (Baulast) is a binding obligation of the property owner to allow or undertake certain actions. It is recorded in the Baulast register and can affect value or buildability.

The present value is the current value of future cash flows discounted at a given rate. In real estate valuation it is relevant for leases or usage rights. It makes financial obligations comparable.

Property valuation determines the current value of a building. It is key for transactions, inheritance and legal contexts and provides a basis for decisions on refurbishment or modernisation.

Pre‑purchase advisory supports prospective buyers in assessing opportunities and risks of a property acquisition. It includes structural condition assessment, document review and market valuation.

The property yield (Liegenschaftszins) is a rate used to capitalise net income in the income approach. It reflects the expected return on land value and is published regularly by valuation committees.

Photovoltaic systems convert sunlight directly into electricity. Installed on roofs, they reduce energy costs and improve ESG performance. Feed‑in tariffs or self‑consumption increase economic efficiency and enable savings on own energy use.

Rental yield expresses the ratio of annual rent to purchase price of a property. It measures the profitability of residential or commercial investments. Operating costs and vacancies reduce net yield.

Remaining useful life describes the remaining period during which a building can be used economically. It is determined individually in appraisals and significantly influences the cost approach. Structural condition and modernisation play a key role.

Refurbishment comprises construction measures to restore or improve the structural condition of a property. The aim is to eliminate defects, improve energy performance or adapt to modern standards. It can affect individual components as well as entire buildings.

The standard land value is an average site value for undeveloped land determined by the valuation committee based on actual transaction prices. It serves as a guide for valuation and tax purposes and varies by location, use and infrastructure.

Standard construction costs (NHK) are standardised values for erecting buildings, depending on type and specification. They form the basis in the cost approach to derive building value. Values are published regularly by the federal ministry.

A site inspection is an on‑site visit by an expert to assess a property. Current conditions are documented, measurements taken and photos recorded. Site inspections are the basis for all types of appraisals.

Sound insulation refers to construction measures to reduce sound transmission within a building or between buildings (e.g. terraced houses, adjoining flats). It is important for residential comfort and regulated by building codes. Particularly crucial in multi‑family houses.

“Zinshaus” describes a residential building that comprises multiple rental units and is intended for long‑term letting. Tenement houses are suitable for investors who aim to generate a stable income stream from renting out residential apartment buildings.

An independent committee that compiles transaction‑based market data for real‑estate valuation. It publishes standard land values and other value‑relevant data, increasing transparency in the land market.

Valuation adjustments align the result of a valuation method to special property‑specific characteristics, e.g. hereditary building rights or maintenance backlogs, to ensure market‑conform values.

The VOB (German Construction Contract Procedures) forms the basis for public clients when awarding construction contracts to create legal certainty and clarity. It provides a detailed framework that considers the interests of both client and contractor. In principle, the VOB is a central element of the German construction sector that helps ensure quality and transparency of construction projects and reduce legal disputes.

VOB/A regulates the tendering and awarding of construction services and contains provisions on bid submission and the evaluation of bids. The aim is to ensure transparency and fairness in the procurement procedure.

VOB/B regulates the contractual conditions for the execution of construction services. This includes fundamentals such as scope of services, remuneration, warranty and acceptance. It provides a transparent structure for both contractors and clients in day‑to‑day practice.

VOB/C describes the technical contract conditions and regulates how certain services must be described in bills of quantities. This part also specifies how the precise accounting and documentation of construction services must be carried out in a way that is comprehensible to third parties.