Is a deviation in market value possible when selling real estate within the family?

Everything is getting out of hand here.

I would also need more background information. So currently the property is being financed, and it is supposed to be transferred to you. But the financing bank refuses to grant you an early repayment because it is not a sale?

I don't know how it is with a gift. But it can also be sold for 1 €. The question is what the tax office will assess. They want to see their real estate transfer taxes. If you come with one euro, it will certainly not be accepted and some value will be applied. It is best to consult an experienced tax advisor.

Alternatively, can another property be offered to the bank for the land charge?

I don't know how it is with a gift. But it can also be sold for 1 €. The question is what the tax office assesses. They want to see their real estate transfer taxes.

But when selling to a child, it doesn't matter at all, since no real estate transfer tax is due anyway. At most, it could be considered more like a gift.

I think the financing bank is listed in the land register, so it should not matter who owns the property. As long as the bank is listed, they probably don't care. The main thing is that the installments are paid, the security (land register entry) remains in place. Regards Olli

I assume the financing bank is registered in the land register, so it shouldn't matter who owns the property.

Clear yes and no. A land charge is abstract. This means it requires a connection to the financing. This connection is established through the land charge purpose declaration (GZE). If the new owner does not sign the GZE, the bank has a problem.

Thank you for the many responses. I'll briefly summarize:

So the property is currently being financed, and is supposed to be transferred to you. However, the financing bank refuses to grant you an early repayment because it is not a sale?

Exactly, that hits the mark.

I don't know how it is with a gift. But it can also be sold for 1 €. The question is what the tax office sets. They want to see their real estate transfer tax. If you come with one euro, it certainly won’t be accepted and some value will be used instead. Best to consult an experienced tax advisor.

Real estate transfer tax is waived because no tax has to be paid between parent and child, I am more worried that if we sell the property for the obligatory 1 euro, the currently financing bank does not agree and continues to cause problems with the repayment of the loan.

The loan runs until 12/31/2024, the outstanding balance including all interest due by then is about 20,000 €, which we would like to pay off so that the bank (or in my case an insurer) is no longer registered in the land register, as I also need financing for my construction project.

Alternatively, can one offer the bank another property as security for the mortgage?

That would be an option, for example if we offered the parents' house as security. Do I understand correctly that the bank would then basically register the mortgage in the land register for my parents' house and I would stand first in the land register of the property? How complicated is such a process? I haven’t found the insurer to be particularly customer-friendly... is this a standard procedure? I assume I don’t generally have a legal right to this?

The borrower wants to get out of the loan agreement. The bank probably does not agree, even against a prepayment penalty. The trick here is supposed to be that a special right of termination (against prepayment penalty) exists in the case of a sale. However, I am surprised that this should not be the case with a gift accompanied by a change in the land register (of course also against prepayment penalty).

Normally, real estate transfer tax is incurred when selling, therefore the tax office has an interest in properties being sold at the "market price" (partly significantly higher than the standard land value) and can use this as a basis for taxation if necessary. Here, however, the sale is in a direct line, so no real estate transfer tax is due. Possibly, the tax office could assess the market value for possible gift tax if the property is worth more than 400,000€ and the purchase price is 1€. Something in between could be declared as a "partial gift".

Options for the borrower if the property exceeds 400,000€: Reduce the price of the property due to negative factors and document these in the purchase contract (i.e. market value less XX due to noise, YY due to a small building window, ZZ due to an annoying neighbor).

Attention: In a new financing, e.g. for house construction, the property value is initially assumed as equity at the purchase price. A higher value then must be substantiated by an appraisal.

Another option (with the support of a lawyer) would be to demonstrate to the bank that there is a legitimate interest according to § 490 para. 2 of the Building Code according to the "borrower's need for alternative use of the property, especially through sale for business or private reasons" (common examples: relocation, divorce, need for money). The need could be that maintaining the property has become too much effort in old age, the alternative use would then be a gift.
How long has the loan existed? There is also the possibility of termination after 10 years with 6 months' notice (without prepayment penalty).