Important Supreme Court Ruling on Real Estate Valuation
On September 27, 2024, the Federal Court of Justice (BGH) issued a significant ruling regarding the valuation of real estate under case number V ZR 21/24. The background of the decision stemmed from a legal dispute arising from a disputed valuation of a property. The case concerned the question of how the market value of a property is to be specifically determined and which criteria may be applied.
The judges found that the market-based valuation of real estate plays a key role in legal adjudication. In the specific case, a property owner filed a lawsuit because he disagreed with the valuation of his property established by an expert. The plaintiff argued that crucial factors such as location and current market developments had been inadequately considered in the valuation.
In their ruling, the judges emphasized that the market value assessment must be based on a comprehensive analysis of the market. From the BGH's perspective, all relevant aspects must be taken into account to ensure a fair and just valuation. The court highlighted that a faulty consideration of factors such as infrastructural developments or potential future construction projects can lead to significant injustices.
Furthermore, the BGH expressed that appraisers must not only rely on historical data when determining the value but also need to consider current market developments and future trends. This applies to both the supply and demand side.An insufficient consideration of these aspects can lead to the market value of a property not corresponding to market realities.
Another point clarified by the BGH was the importance of transparent valuation procedures. The judges pointed out that the reports must be comprehensible to all parties involved in order to strengthen trust in the appraisals. The court called for clear documentation of the valuation methods and the underlying assumptions.
Overall, it can be said that the BGH's decision could have far-reaching consequences for the practice of real estate valuation. It emphasizes the necessity of responsible and transparent handling of valuation procedures to protect both owners and buyers. It remains to be seen how practice will evolve following this decision and whether it will lead to a standardization of valuation procedures.
Author: Anita Faake, Wednesday, October 30, 2024
