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MatthiasKirchner | Expert on real estate appraisal | Value appraisal | Arbitrator | Compensation | Real estate - Due Diligence | Mediation

The valuation report:

The fair market value, appraised by an expert, is the market value which, among other things, is needed when a real estate transaction will not be settled directly. It is, for example, necessary in case of apportionment and division of a decedent’s estate: Here, the
pro rata disbursement amount of a community of heirs is evaluated without the property being sold.

The real estate appraisal is effected according to the “German administrative regulations for valuation”. Valuation reports to fair market value are typically made for:

• Undeveloped sites

• Favoured agricultural land
• Greenfield site
• Land earmarked for development
• Building land

• Residential real estate

• Owner-occupied apartments and other part ownerships
• Free standing single-family houses
• Terraced houses
• Semi-detached houses
• Multi-storey buildings

• Investment properties

• Combined business and residential property
• Business premises (mixed use: retail trade / office)
• Office property

• Special use property (industrial properties, retail property, hotel property…)
• Farms (exterior features)

Other privileged exterior properties

The valuation report of fair market value serves various purposes, to name a few:

• Appraisal of property asset in order to sell it at the market price
• Real estate appraisal to find out the mortgage lending value
• Compulsory auction to fulfil the claims of creditors
• Compulsory auction in case of quarrels within communities of heirs or other jointly controlled assets
• Valuation of the apportionment of gains (divorces)
• Valuation of the initial asset when entering into a marriage contract
• Valuation of the possible return on planned real estate investment
• To have a sound position towards the tax office in questions of gift tax, land transfer tax and other taxes
• …
  

The appraisal of compensation

A special field in the valuation of fair market value and real estate appraisal is the valuation of the decrease in value. This decrease in value can be caused by existing real property rights or other encumbrances (which means intrusions comparable to dispossession) without the property being transferred. An example could be the limited personal easement in favour of public transport services. Even in this case, the fair market value is the basis for the decrease in value. This kind of appraisal report is needed for:

• the dispossession of real property rights and intrusions into the property (comparable to dispossession)
• encumbrances due to ground lease
• the evaluation of the decrease in value due to encumbrances and real property rights (life estate, land charge, superstructure, way-leave…)
• other encumbrances

Valuation of rental value (residential buildings)

By using statistical and econometric methods, the valuation of rental value provides an overview of the market rent (customary comparable rent in a municipality). This requires the valuation of at least five comparable properties in comparable locations and comparably equipped.

In this field of valuation, the expert needs long time experience, especially a bulky knowledge of market data and practical experience. This kind of appraisal is needed in cases of:

• rent level quarrels (legal and out of court)

The arbitrator (industrial premises)

If there is an agreement to arbitrate, experts on real estate are often involved into the evaluation of the future rental charge of commercial lease contracts. This procedure is only necessary for discrepancies concerning the rental charge. The arbitrator’s task is to deliver an expert opinion, similar to a lawsuit. He has no legal decision rights.

The expert as referee (industrial premises)

Within an arbitration procedure, the expert can come to an arbitrator’s award. By a binding preceding settlement, the parties, being involved into the dispute, agree to the arbitrator’s award. Further legal actions are impossible.

Real estate - Due Diligence

The due diligence analysis of real estate requires a systematic analysis of potentials and weaknesses, a valuation of risks as well as a substantiated appraisal.

For instance, the focus lies on DCF-systems, the analysis of personal and material capabilities, the position in the market, legal, financial risks and risks due to the location, environmental impacts…

Normally, a due diligence analysis is made for large investment properties and real estate portfolios.

Mediation

In many cases, the mediator might be helpful to avoid regulatory or legal actions in rent level quarrels. The mediator offers his sound knowledge to the contracting parties (mostly industry), as he considers the market situation from a professional point of view. In most cases, the contracting parties do not have access to this kind of data. It might also be possible that they are emotionally involved which makes direct contract negotiations very difficult.

The independent consultant

In questions of property and real estate transactions, experts on real estate often give advice to institutional and professional real estate companies as well as to the final consumer. As the field of real estate is very complex, these services are a substantial part.