How to Calculate the Market Value of Property

What exactly is the market value of property?

The market value of property corresponds to the price you can expect to obtain when selling on the open market. Thus, the market value of property forms the basis for price determination.

It is not an objective number but rather an expert estimate. The actual sale price may significantly exceed or fall below this market value of property.

On what factors does the market value of property depend?

From the location to the standard of finish and the local tax rate: many factors influence the estimated market value of a property. In the case of a building with land, the following factors, among others, are taken into account when determining the market value:

• The location of the property

• The living area and land area, and the number of rooms

• The year of construction and condition of the property

• The level of finish (e.g. garage, elevator, basement rooms, balcony or terrace)

• The view, exposure to sunlight, and noise pollution in the surrounding area

• Special characteristics, e.g. the local tax rate or legal constraints that may affect usage (for example, zoning)

• The general market situation and demand

How is the market value of property calculated?

For property valuations there are three different methods of determining the price:

• The comparable‐sales method

• The income approach

• The cost approach

Which method is appropriate depends on the type of property and the seller’s requirements.

Comparable‐Sales Method

Also known as the hedonic valuation method, this approach determines the market value of property based on reference values. The valuer sets the price by comparing it with already achieved sale prices of similar properties.

This method provides meaningful results when enough comparable sales data is available. It is especially suitable for properties with average finish in desirable locations. It is often used by online calculators — but also by specialist property valuers and real estate agents.

Its disadvantage: if there are not enough comparable objects, it is simply not feasible. It cannot reliably capture the value of properties with below- or above-average amenities, unique features, or in unusual locations.

Income Approach

This method is primarily used for rented residential and commercial properties. Here, valuers compare maintenance costs with past and expected future income. From this, the current market value of property is derived.

Cost Approach

In this method, the costs are evaluated that would be needed to recreate or replace the property. A key advantage is that the original purchase price does not play a major role.

This method is particularly useful for luxury properties with a very high standard of finish or buildings with very individual features for which there are no comparable properties on the market.

Determining the market value of your property – the best way to proceed

As a first step, an online calculator is often useful for an initial assessment. This will give you a rough guide, but cannot take any details into account in the valuation.

If you are serious about selling, you should call in a specialist for an accurate estimate. They will inspect the property on site and examine it in detail. This will give you a much more accurate estimate. You can either seek the assistance of real estate appraisers or real estate agents.

You can find professional real estate appraisers through the SIV professional association or the HEV homeowners' association, for example. However, you should generally expect to incur additional costs in the four-digit range.

Real estate agents, on the other hand, usually take care of the appraisal as part of their mandate, so the costs are already included in the agreed commission. In addition, by hiring a real estate agency, you benefit from not having to take on the work of organizing the sale, negotiating, and drafting contracts yourself.

This is how Engel & Völkers real estate agents proceed

1. First, a property analysis is carried out during a non-binding initial appointment on site. In this step, all data necessary for the valuation is recorded. This includes, among other things, a precise assessment of the location and condition of the property as well as the wear and tear of all components.

2. The second step is data collection. This includes identifying comparable properties and their market prices, as well as any rental and yield data.

3. Once the most important data has been gathered, the appropriate valuation method is selected. For single-family homes and condominiums, this is usually the comparative value method. The income value method is primarily used for pure investment properties and commercial buildings, while the asset value method is used for properties with a particularly high standard of finish or a very individual design.

4. The next step is to effectively calculate the market value and verify its plausibility.

Finally, the estimate is recorded and explained in a comprehensive dossier. The seller receives the estimate and a recommendation for the asking price in a presentation. This is often slightly above the market value to allow for a small buffer for price negotiations.

Does the market value of property match the final sales price?

The market value is not necessarily the actual sale price. It merely reflects an estimate of the current value of the property.

However, in an actual sale, additional factors contribute to the price that the seller can achieve. These can range from the current market situation and the chosen marketing strategy to the individual motivation of the buyer.

Accordingly, the market value may differ from the price ultimately achieved. It may be higher if, for example, a prospective buyer is willing to pay a higher price due to the location or architecture. Or it may be lower if, for example, supply in this particular location exceeds current demand or the seller is under time pressure.

What documents are needed to calculate the market value of property?

This depends on the property in question. This overview can therefore only serve as an initial guide and indicate which documents are regularly important for property valuation based on our experience.

It is best to clarify in advance with the expert conducting your valuation exactly what information and documents they need in order to avoid delays or additional costs.

For all properties:

• Land register extract

• Cadastral map

• Environmental hazard inventories

• Building insurance policy

• Safety certification for low-voltage electrical installations

• Zoning regulations and site plan

• Municipal plan or situational plan

• Private agreements (e.g. rights of way, neighbor agreements)

• Owner-occupied value or tax value

• Financing information

• Building plans (floor plans, sections, façade plans)

• Building description

• Recent, quality photos

For condominiums (owner-occupied or shared ownership):

• Justification including plans

• Rules and bylaws, usage regulations

• Minutes of owners’ association meetings

• Sales documentation

• Budget and statement of ancillary costs

For rented properties:

• Tenancy agreements

• Rent schedules

• Maintenance cost statements

We know the market value of your property

Would you like to have the market value of your property reliably determined? For a quick calculation, use our online property valuation tool here. Would you prefer an on-site inspection and a personal consultation with an expert? Conveniently arrange an appointment here - we will be happy to advise you.