The common way of determining the value of a piece of land in Germany that has or has not been built on is based on the legal proceedings of the German Valuation Ordinance (ImmoWertV):
German income method
Sales comparison method
Real value method
With these valuation methods, the market value is determined according to paragraph 194 of the German Building Code [Baugesetzbuch / BauGB].
This deals with a value that especially does not take into account particular and/or personal circumstances as part of the price.
In the majority of valuations, the value of the property is orientated towards the returns that can be made.
Here, detailed information on current concluded lease agreements are just as important as knowledge on the middle and long-term development on the property’s location. Even the actual lease agreements have to be taken into consideration.
Compared to international approaches, this approach involves a breakdown of revenues from the physical structure on the one side and a breakdown of revenues from the plot of land on the other.
The sales comparison approach is used especially for determining land value.
The plot of land to be examined is made comparable to a number of other current acquisition cases of plots of land. Among others, the comparability is made up of the location (micro as well as macro location), the size, the form as well as the possible physical uses.
The real value is determined from the value of the land and the value of the physical structures.
The physical structures are calculated based on the normal manufacturing costs (NHK 2010). The age of the building, possible structural damages and/or structural defects are also taken into consideration along with other circumstances that affect value.
The real value approach is used where a determination of value is not possible through determining incomes or through comparisons. It is often used as a control value.