Selling a property is always a big decision. But what exactly determines the price that a seller can ultimately demand - and possibly achieve? The real estate market is a complex interplay of economic conditions, personal factors and strategic considerations. In this article, we take a look at the key influencing factors and also shed light on the perspective of potential buyers - including the so-called "bargain hunters".

1. the market situation: economy, interest rates & demand

Before a price tag is even set, the overarching market determines the framework conditions:

Economic growth & labor market

A growing economy and a stable labor market are boosting buyer confidence. More people can afford a property - demand is rising and so are prices. In economically uncertain times, on the other hand, people are less willing to make large investments.

Interest rates & financing costs

Interest rates have a direct impact on purchasing power. In periods of low interest rates, buyers can finance more without overburdening themselves - which causes prices to rise. Rising interest rates, on the other hand, reduce the amount that can be borrowed, which can have a dampening effect on prices.

Supply & demand

A shortage of supply with high demand (e.g. in conurbations) leads to rising prices. Conversely, an oversupply - for example due to new construction projects or migration - can have a price-dampening effect.

2. pricing: How is the property value calculated?

Expert methods

Real estate valuation is not an exact science, but there are clear guidelines:

a) Asset value method

The price is determined on the basis of the production costs of the building plus the land value. Particularly relevant for detached houses.

b) Income capitalization approach

What counts for rented properties is how much return they generate. Rent levels, vacancy risk and management costs are taken into account here.

c) Comparative value method

This method compares similar properties that have already been sold in the area. It is most common for condominiums and single-family homes.

d) The market regulates

Despite all the models, the actual purchase price always results from the interplay of supply and demand. In the end, a property is worth what a buyer is willing to pay.

Practical pricing in day-to-day sales

In practice, a mix of market observation, comparative analyses and tools is always used.

1. comparative value through market analysis

The most common method in practice - especially for apartments and detached houses:

• How much have comparable properties in the area cost recently?
• Data sources: Real estate portals, expert committees, estate agent databases (e.g. Sprengnetter, ImmoWert)
• Criteria: Location, living space, condition, year of construction, plot size, fixtures and fittings
• Brokers use market reports & empirical values here.

Practical tip: Sellers often look first at platforms such as ImmoScout24 or Immowelt, but there asking prices are displayed - not the actual sales prices achieved. This can lead to overestimates.

2. online assessment tools

Many portals offer free or fee-based online calculators. They provide an estimated value based on inputs such as location, size, year of construction and fittings.

• Advantage: Fast, low-threshold, good first point of reference
• Disadvantage: No consideration of special features such as condition, neighborhood, micro-location

Examples: ImmoScout valuation, Homeday, Sparkassen-ImmoWert, McMakler calculator

3. broker assessments

Professional estate agents often offer a free market value analysis - usually in order to win a sales contract.

• Combination of empirical values, comparable properties & own market assessment
• Realistic, but sometimes slightly optimistic to secure sales order
• Many brokers use software tools (e.g. from Sprengnetter, FlowFact, onOffice)

Reputable estate agents provide transparent reasons and do not suggest fantasy prices.

4. emotional pricing by owners

Many private sellers set their own price - often emotionally influenced:

• Investments ("I invested €300,000 in a new heating system...")
• Desired profit ("I need at least €400,000 profit for a new investment...")
• Neighborhood / comparison ("The neighboring property was sold for € 2,500,000, but my location is better ...")

This often leads to inflated prices - with the risk of long sales periods or price negotiations.

3. the role of seller and buyer

The seller

Not everyone sells voluntarily. Inheritances, divorces, relocations or financial bottlenecks influence motivation - and often also the willingness to negotiate. An emotional value can be included in the asking price, which is not always in line with the market. In such cases, the following applies in particular: Beware of bargain hunters!

The buyer

There are also different situations on the buyer side: Owner-occupiers want to find "their home", while investors make sober judgments based on yield. Budget, financing framework and urgency influence behavior - a couple with an expiring lease acts differently than an investor with a broad portfolio.

4 The bargain hunters: motivations and strategies

Bargain hunters are a particular "player" on the real estate market - mostly experienced buyers who are specifically looking for undervalued properties or properties in need of renovation.

Typical features:

• Good understanding of the market: You know prices, locations and potentials precisely.
• Calculated refurbishment vision: What looks like a "ruin" to the layman is an investment with a margin for them.
• Negotiating skills: They often speculate on the seller's weakness - time pressure, divorce, insolvency.
• Quick decisions: With equity or secured financing, you can strike quickly.

This can be tempting for sellers - especially when the pressure to sell is high. However, a supposed bargain is often a "sale below value" for the seller.

5. investor logic: rental yield, rents, vacancy & factor

When it comes to investment properties, it's not emotions that count, but numbers. Investors value real estate like a business model. The following factors play a key role here:

Rental yield (gross yield)

The rental yield is a percentage comparison of rental income to the purchase price - a key value for investors.

Formula:

Rental yield (%) = (annual net cold rent / purchase price) × 100

This key figure shows at a glance how profitable a property is in relation to the purchase price. The higher the yield, the more attractive - at least on paper.

Note: The rental yield is always viewed by investors in comparison to alternative investments. Real estate is generally regarded as a rather low-risk investment, so the alternatives are to invest investors' money in government bonds, for example.

ACTUAL rent vs. TARGET rent

• ACTUAL rent: The actual rental income currently achieved.
• TARGET rent: The amount that would be possible according to market potential or rent index.

A large difference between the ACTUAL and TARGET rent can indicate development potential (but also risk). A property with a very low ACTUAL rent but high TARGET potential offers development opportunities - e.g. through a change of tenant, refurbishment or indexation.

Example:

• Annual rent: € 180,000
• Purchase price: € 3,000,000
  → Rental yield = 6.0 %

Note: This is the gross yield - excluding ancillary purchase costs, maintenance, administration, etc. The net yield is often significantly lower.

Vacancy

Vacancies reduce income - temporarily they can be tolerated, but permanently they are a risk factor. Reasons can include poor location, condition or excessively high rents.

Vacancy means lack of income - correspondingly negative for income and value.

• Temporary vacancy: Interim letting, modernization - often calculable
• Structural vacancy: Due to poor location, condition or rent level - critical!

Investors value vacancies on a risk-oriented basis: The higher the vacancy rate, the higher the risk discount.

The factor (multiplier): How investors think

The factor (also multiplier is a central value in investment pricing.

Formula:

Factor = purchase price / annual net cold rent

Example:

• Purchase price: € 5,000,000
• Annual rental income: € 250,000
  → Factor = 20

A high factor usually means a lower rental yield. The factor is used by investors for quick valuation:

• Factor 15-18: Attractive in good locations
• Factor 20+: Only acceptable for top locations or very low risk

What do these values mean in practice?

• High actual rent + low factor: Very attractive property, but often expensive (low development potential)
• Low ACTUAL rent + high TARGET rent: Increase in value possible, but with risk (modernization, change of tenant, approvals)
• Vacancy + favorable factor: Investor opportunity - but beware of permanent problems (location, substance)
• High factor + little development potential: overpriced from an investor's point of view

Conclusion: For investors, it is a game between cash flow and potential

These key figures help to realistically assess the economic value of a property - beyond location and emotions. Buyers who do the math look up:

• How much cash flow does the property generate?
• How stable is this cash flow?
• Is there potential for growth (rent, utilization)?
• Is the asking price fair in relation to these figures?
• Is there an alternative use for the property that only the investor knows about?

Sellers, on the other hand, should know:

The better the figures and prospects, the higher the achievable price - even for bargain hunters.

6 Options & alternatives: How flexible are buyers and sellers?

Options for sellers

• Waiting for the right time: If there is no time pressure, it can be worth waiting out market trends.
• Renting instead of selling: If you need income, you can also rent out and keep the property as an investment.
• Partial sale or annuity (in the private sector): For older owners in particular, new models are available that release Cash position without having to sell the entire property immediately.

Options for buyers

• Alternative locations: If you are flexible, you will often find better conditions in the surrounding area or in less sought-after locations.
• Existing properties instead of new builds: Refurbishable properties can be cheaper and offer tax advantages.
• Patience & market observation: Especially in volatile times, it pays to pay attention to price movements and not to strike immediately.

Note: Always know the options of the other party. For example, if the buyer can easily acquire similar properties at the location, a high price is unlikely. If the buyer needs the property/plot to expand its location, the buyer will be more willing to pay a higher price.

Conclusion: Real estate prices are more than square meters and location

The price of a property is the result of the tension between the economic situation, valuation mechanics and human motives. Sellers should calculate realistically - and not just be guided by emotional value. Buyers, on the other hand, benefit from a clear strategy and knowledge of the market. And bargains? They do exist - but rarely without a catch.

Those who act wisely remain flexible and informed - because in the end the market decides, but both sides can play along.