Cost, income and sales comparison: the three valuation methods in the report

Every valuation report ends with a single number. How that number comes about is decided much earlier, when the method is chosen. A detached house valued by the cost approach lands on a different figure from the same house valued by the income approach. Recognise the method in the report and check its central assumption, and you know far better how solid the appraised value really is.

Which valuation methods exist?

The German valuation ordinance, the ImmoWertV, knows three: the sales comparison approach, the income approach and the cost approach. Under § 6 ImmoWertV the surveyor chooses by the type of property and by what is customary in the market. They may combine methods, but must give reasons for the choice.

The 2021 version of the ImmoWertV has applied since 1 January 2022 and brought together guidance that used to be scattered. Reports with an older valuation date may therefore still refer to the earlier system.

Which method do surveyors actually use?

In the reports that have been analysed, detached houses are dominated by the cost approach, while apartments and apartment buildings are dominated by the income approach. For undeveloped land an income value practically never appears. The distribution follows what § 6 ImmoWertV requires: the method follows the property, not the surveyor's taste.

Klaava is a German platform for foreclosure auction dates and analyses the associated valuation reports automatically. As at 25 August 2026 it recorded 3,195 coming hearings at 418 local courts, 2,888 of them with an appraised value set by the court and a median of 173,000 euros. For 1,024 of those hearings a full report analysis exists. This is how the stated values are distributed:

On method: what was counted is whether the report states a cost value or an income value as an explicit figure. The comparison value is not recorded separately, because reports usually derive it in the running text rather than presenting it as a figure of its own. The table therefore says nothing about how often the sales comparison approach is used. All figures as at 25 August 2026.

The sales comparison approach: value from real prices paid

Here the surveyor derives the value from prices actually paid for similar properties. § 25 ImmoWertV requires comparables whose characteristics agree sufficiently. The data comes from the price collections of the official valuation boards, fed by every notarised purchase contract.

How the surveyor works

They look for sales of comparable properties in the region, adjust out the differences in location, size, year built and condition, and derive a price per square metre. Instead of individual comparable prices they may, under § 24 ImmoWertV, use comparison factors published by the valuation boards, such as an average price per square metre of living area for a particular age band.

What to check

• The number of comparables. Two sales are not a solid basis. The surveyor normally states the number in the text.
• The period the comparables come from. Sales from a different phase of the market distort the result in either direction.
• The geographic boundary. A comparison group covering half the district is worthless where locations vary street by street.

The income approach: value from the rent

Here what counts is what the property earns on a lasting basis. The surveyor capitalises the net income of the buildings and adds the land value. The steps are set out in §§ 27 to 34 ImmoWertV. For a let property this is the customary route, because an investor calculates in exactly that way.

How the surveyor works

1. Gross income: the annual rent achievable on a sustained basis, not necessarily the rent currently paid (§ 31 ImmoWertV).
2. Net income: gross income less running costs such as management, maintenance and an allowance for lost rent (§ 32 ImmoWertV).
3. Return on the land value: the land value multiplied by the property yield rate. What remains is the buildings' share of the net income (§ 33 ImmoWertV).
4. Present value factor: the buildings' net income is capitalised over the remaining useful life (§ 34 ImmoWertV).
5. Income value: the buildings' income value plus the land value.

A simplified example: 30,000 euros of gross annual income, 6,000 euros of running costs, so 24,000 euros of net income. With a land value of 120,000 euros and a property yield rate of 2.5 per cent, 3,000 euros are attributable to the land, leaving 21,000 euros for the buildings. At a present value factor of 20 that gives 420,000 euros for the buildings plus 120,000 euros for the land, 540,000 euros in total.

What to check

• The rent used against the rent being paid. If the surveyor works with a market rent above the actual rent, the appraised value contains an assumption you would have to make good through your own letting work. Where tenancies exist, tenancy law also applies, see tenants at a foreclosure auction.
• The property yield rate. It comes from the local valuation board. Small changes matter a great deal: half a percentage point moves the income value noticeably.
• The remaining useful life. It determines the present value factor. A generously assumed remaining life raises the value without anything about the building having improved.

How to build your own calculation from this is set out in calculating the yield on a buy-to-let bought at auction.

The cost approach: value from land and building fabric

The cost approach asks what it would cost to replace the land and the building today. It adds the land value to the construction cost of the building, reduced for age and wear, and then adjusts the result with a market factor. It is used above all where comparable sales are missing and no rent arises.

How the surveyor works

1. Provisional building value: average construction cost per unit of area times the area (§ 36 ImmoWertV).
2. Depreciation for age: under § 38 ImmoWertV the factor is the ratio of remaining useful life to total useful life.
3. External works: garages, paths and fences are valued separately under § 37 ImmoWertV.
4. Land value: usually from the standard land value published by the valuation board.
5. Cost approach factor: the provisional value is multiplied by a factor adjusted to the property (§ 39 ImmoWertV). Only that step brings the number to market level.

What to check

• The cost approach factor is the biggest lever. Depending on the market it sits well below or well above 1.0. If it is not in the report, the link to the market is missing.
• The remaining useful life after modernisation. Modernisation extends the remaining life on paper. Check whether the work assumed was really carried out.
• Deferred maintenance. A flat deduction is not a cost estimate. Set your own quotes from trades against it.

Why a report often carries two values

Many reports run a second method as a check and then give reasons for the result they follow. In the Klaava analysis, 246 of the 1,024 reports contain both a cost value and an income value, so a good one in four. The appraised value set by the court does not automatically match either of them.

That is exactly the interesting spot for you. Where the cost value and the income value diverge sharply, it says something about the property: a house with a high cost value and a low income value was expensive to build but is hard to let. The other way round, a high income value against a low cost value points to good rents in plain building fabric. The surveyor's reasoning for the value they follow is the most important paragraph in the whole document.

How to check the method in your report

First find the section on the choice of method, usually in the first third. Then check the one assumption the method hangs on: the comparables, the rent used or the cost approach factor. Finally compare the valuation date with the hearing date.

Five steps:

1. Identify the method and read the reasoning for the choice.
2. Check the method's central assumption and write it down.
3. Hold the land value against the current standard land value for the municipality.
4. Collect every deduction and replace it with your own figures.
5. Compare the valuation date with the hearing date.

That last point is not a detail. Of the 1,024 reports analysed, 966 state a valuation date, and the median of those lies 362 days back, so a good twelve months before today. A regional market can move noticeably in that time, in either direction.

How the appraised value comes about overall and what part it plays in the proceedings is set out in the appraised market value in the report. The full reading path through a report is in reading a German valuation report. Which method was used for a particular property is shown in the analysis on the property map.

Frequently asked questions about the valuation methods

Which method is used at a foreclosure auction? It depends on the property. Under § 6 ImmoWertV the surveyor chooses by the type of property and by what is customary in the market. In the Klaava analysis, 73.5 per cent of detached house reports state a cost value, against 9.3 per cent for apartments.

What is the difference between the cost value and the appraised market value? The cost value is the result of a calculation from the land value and the construction cost. The appraised market value is the figure the court fixes under § 74a (5) ZVG. It can match the cost value, but it need not: the surveyor may follow another method or weight the results.

Why does my report contain two different values? Because the surveyor ran a second method as a check. In the Klaava analysis a good one in four reports contains both a cost value and an income value. What counts is the value the surveyor follows, with reasons.

Can I challenge the method chosen? Not as a bidder. The parties to the proceedings can appeal against the decision fixing the appraised value. As a prospective bidder what remains to you is your own check, and it feeds into your maximum bid rather than into the proceedings.

How old may the valuation date be? There is no statutory limit. In the Klaava analysis the median lies 362 days before the reference date of 25 August 2026. The older the date, the more your own comparison with current listings and standard land values matters.

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For a step-by-step walk through a full report, see reading a German valuation report. What the appraised value means for your bid is set out in minimum bids at German foreclosure auctions.

This article is general information. It does not replace advice from a qualified lawyer.