Real estate valuation – calculating the market value

How real estate is valued

Knowledge of how real estate is valued is indispensable, especially if you are buying or selling a property. A valuation may also be relevant when renewing your mortgage. However, numerous questions may arise in this regard. Read here about how real estate is valued.

Making real estate valuations before a purchase or sale

Real estate valuation serves to determine the value of a property. This value is especially important when purchasing or selling property. In general: Different methods can be applied, and different standards and valuation tools can be used to value real estate. Owners can value their property themselves, for example, by using online tools or involving experts.

In Switzerland, the valuation of a single family dwelling or a condominium results in the market value of the property. This amount corresponds to the price that is likely to be obtained within a year under normal market conditions.

Real estate valuation using the hedonic method

Different methods are available to calculate the market value of a property, though these methods can vary significantly. To value a single family dwelling or a condominium, Credit Suisse uses the hedonic method. This is a computer-supported, comparative value method, based on a statistical process.

The hedonic method compares the purchase prices of other properties with as many similar features as possible. Essential parameters in this process include the location, applicable tax multiple, property size, age, condition of the building and other quality aspects of the property. The impact of the various parameters on the value of the real estate differs considerably. The location of the real estate and the tax multiple have a greater weight than, for example, the property's fixtures and fittings. To calculate the market value of the property, experts analyze the parameters with the help of the valuation software.

Real estate valuation by an evaluation expert

In addition to a real estate valuation by a bank, owners or buyers of real estate can also have the property valued by a professional evaluator. Evaluators base their assessment of the property on their extensive specialist knowledge and experience. They inspect the property on site and are thus able to take individual features, such as antique construction elements or an unusual location, into account. Evaluators are therefore usually asked to submit valuations in special cases, such as old country houses, luxury homes or traditional Swiss farmsteads ("Spycher").

Tips for real estate valuation

Be careful when using online tools

Online tools allow you to assess a property's value for free in just a few clicks. All you have to do is enter details such as the address, habitable floor area, year of construction and state of the property. These online tools provide you with an initial estimate of the value of the property. However, this does not usually reflect the actual value of the property. Moreover, it is often unclear on which method the estimate is based.

Calling in an expert

Owners are usually not able to objectively assess a property, its condition and value. The owner's estimate of the property value tends to be too high. Bank experts or evaluators are able to calculate the true value of a property.

Be careful when relying on valuations made by real estate agents

Real estate agents frequently offer free valuations of your property. They may hope to be commissioned for the sale and are likely to provide a more optimistic estimate of the property. It is sometimes very difficult to distinguish between good, qualified real estate agents and self-styled experts at first glance.

Get a second opinion

If you have doubts about the initial valuation of the property, you should get a second opinion. Valuations of real estate may differ considerably, depending on the method used. It is better to be safe than sorry. Then you won't run the risk of nasty surprises when you buy or sell the property.

The market value is not the same as the purchase price

The market value is the basis for the long-term financing of real estate. Therefore, it plays a crucial role in obtaining a mortgage.
If the defined market value differs from the purchase price of the property demanded by the seller, the mortgage will be calculated based on the lower of cost or market principle. This principle states that the lower of the two values shall always apply if the purchase price and the market value differ.

A simple guide to the lower of cost or market approach

If the market value is less than the purchase price, the maximum mortgage amount is lower. This means that purchasers must contribute a greater share of their own capital. This amount increases by the difference between the market value and the purchase price. For example:

The market value of a single family dwelling was estimated at CHF 850,000, but the purchase price is CHF 1,000,000. According to lower of cost or market, the mortgage will be calculated based on CHF 850,000. The difference between the market value and the purchase price in the amount of CHF 150,000 must be paid entirely by the purchaser from their own funds. The owner's capital required increases from CHF 170,000 to CHF 320,000.

Purchase price


Market value 850’000
Mortgage (max. 80%) 680’000
Owner's capital 170’000
Difference market value/purchase price 150’000
Total owner's capital 320’000

All amounts in Swiss francs.

Why and when to evaluate your property

The market value may vary considerably depending on the property and factors such as size, construction style and location. The basic market situation also changes over time. This has an impact on real estate prices. This is why it pays to revalue the property over time.

Real estate valuation is a must when you want to buy or sell a property. It can also be important in a case of succession, divorce, or when renewing a mortgage. A real estate valuation by a certified expert will cost about CHF 1,000. But this investment pays off, especially if the valuation has to satisfy judicial requirements or if you need a reliable value of the property to take out a mortgage.

Are you thinking about the value of your property?

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