Obligation to renovate: effects on the sale of real estate

If a property changes hands, the Building Energy Act (GEG) of 2020 obliges the buyer to renovate it. For buyers, this means that the property will become more expensive. For sellers, this in turn means that it is currently even more difficult to find a buyer.

As with household appliances, there is also an energy efficiency class for real estate, ranging from A to H. By 2033, all residential buildings in the EU should achieve energy efficiency class "D". According to estimates, around 14 million buildings in Germany would be affected. For prospective buyers, this means an additional burden on top of the still high property prices in some cases and the increased interest rates for property financing. When calculating their financial resources for a house purchase, they must take these costs into account.

What does this mean for sellers?

This makes it more difficult to purchase a property. This is why many prospective buyers try to deduct the costs of renovation from the purchase price. If you don't want to be stuck with your property, you could be forced to meet the demands of the prospective buyer.

The heat pump is also leading to another change in the real estate market: location is no longer the only important criterion, but also the energy class of the building. Sellers should bear this in mind. Properties with poor energy efficiency are at risk of drastic price reductions.

Value of the property

In any case, it is advisable to consult a local quality estate agent. They will carry out a professional valuation. This forms the basis for the price strategy and the price negotiation with the prospective buyer. With a professional valuation behind them, sellers can appear more confident in price negotiations. However, it is better to leave this to a professional.

Price negotiation

In the current market situation, it is almost impossible for sellers to negotiate prices themselves. A lot of background knowledge is currently required to be successful. For example, how much property are banks prepared to finance now? How much equity do prospective buyers need to raise? And last but not least: How much will the refurbishment cost? This is where owners should rely on the help of a professional in order to sell their property at a fair market price within a reasonable period of time.

Renovate before selling

An alternative could be to renovate the property yourself before selling it. If the necessary measures are implemented, this has a positive effect on the price. There are also state subsidies for refurbishment. Buyers who try to push the price down by referring to the refurbishment costs will not include the state subsidies in the calculation. The seller can also take advantage of this benefit, which would otherwise be used by the buyer.

An energy consultant can tell you which measures make sense in terms of energy efficiency and meet the standard required by the state. A quality estate agent in your region will know which measures will affect the value of your property and how.

Would you like to know how much your property is currently worth and whether it is worth renovating before selling? Get in touch with us! We will be happy to advise you.

Notes

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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