Am I Wrong About Churches?

[Eli]

If you don't know what you are doing, you are incompetent. If you try to apply income that does not go with the real estate, then you are incompetent.

The Bible Belt:

http://geography.about.com/od/culturalgeography/fl/The-Bible-Belt.htm

It would be like trying to value a hotel or fast food restaurant based on their net income. There is a difference between business value and real estate value.

 

[George Hatch]

In this region there are always sales, so I don't even bother with cost. Building areas *tend* to be reasonably accurate, so I don't worry much about that, either.

 

[Stephen J. Vertin MAI]

"There is a difference between business value and real estate value."

I am not going to argue a point I agree with (it makes no sense). I am simply saying I am not so quick to pull the "incompetency" trigger without seeing what was done. A one sentence explanation does not express much would you not agree?

Further there are many real estate types directly tied to business value. This comment should bring them out of hibernation but it is why AI came up with:

Market value of the total assets of the business is defined as the market value of all of the tangible and intangible assets of a business as if sold in aggregate as a going concern. This definition is taken from “A Business Enterprise Value Anthology”, Second Edition.

It is near impossible to separate the value of the real estate from the value of the business in a number of real estate types (at least accurately). However, I am with you in pointing out churches are not one of them (at least given my experience).

George: I do the same, while I do generally complete a cost approach (because some clients insist on two approaches) there is enough data here to full support sales comparison.

 

[Eli]

I think of a scenario where a single wealthy individual could be donating a ton.

"There is a difference between business value and real estate value."

I am not going to argue a point I agree with (it makes no sense). I am simply saying I am not so quick to pull the "incompetency" trigger without seeing what was done. A one sentence explanation does not express much would you not agree?

Further there are many real estate types directly tied to business value. This comment should bring them out of hibernation but it is why AI came up with:

Market value of the total assets of the business is defined as the market value of all of the tangible and intangible assets of a business as if sold in aggregate as a going concern. This definition is taken from “A Business Enterprise Value Anthology”, Second Edition.

It is near impossible to separate the value of the real estate from the value of the business in a number of real estate types (at least accurately). However, I am with you in pointing out churches are not one of them (at least given my experience).

George: I do the same, while I do generally complete a cost approach (because some clients insist on two approaches) there is enough data here to full support sales comparison.

Yes. That is a horse of a different color.

It would also be best handled by an accountant IMO. Or at least with their assistance.

Think about the most popular pastors in the world. When a church sells that pastor is usually gone before it sells. And, major contributors could leave any day of the week at any time even if the church is not selling.

 

[The Warrior Monk]

I'm not a big fan of appraising churches; I leave that to those who specialize in them. I'll appraise the small ones, because there are usually arm's length sales of these properties to arrive at a credible value conclusion. It's been my observation that once they are not being transferred amongst the larger religious groups, the market is not kind to these properties due to zoning issues, obsolescence issues, etc. Many are located in residential zones and have very few alternative uses. Even if alternative uses are available, the additional interior space results in higher maintenance and utility costs.

 

[Eli]

I'm not a big fan of appraising churches; I leave that to those who specialize in them. I'll appraise the small ones, because there are usually arm's length sales of these properties to arrive at a credible value conclusion. It's been my observation that once they are not being transferred amongst the larger religious groups, the market is not kind to these properties due to zoning issues, obsolescence issues, etc. Many are located in residential zones and have very few alternative uses. Even if alternative uses are available, the additional interior space results in higher maintenance and utility costs.

Yeah, I've seen daycares done in several where the main church relocated to a better area.

 

[George Hatch]

"There is a difference between business value and real estate value."

I am not going to argue a point I agree with (it makes no sense). I am simply saying I am not so quick to pull the "incompetency" trigger without seeing what was done. A one sentence explanation does not express much would you not agree?

Further there are many real estate types directly tied to business value. This comment should bring them out of hibernation but it is why AI came up with:

Market value of the total assets of the business is defined as the market value of all of the tangible and intangible assets of a business as if sold in aggregate as a going concern. This definition is taken from “A Business Enterprise Value Anthology”, Second Edition.

It is near impossible to separate the value of the real estate from the value of the business in a number of real estate types (at least accurately). However, I am with you in pointing out churches are not one of them (at least given my experience).

George: I do the same, while I do generally complete a cost approach (because some clients insist on two approaches) there is enough data here to full support sales comparison.

I also add a cost approach when a client asks for it.

One trend that has surfaced over the years is that the pricing for churches has not kept pace with most other non-residential property types, so we commonly run into HBU issues for the suburban units with low lot coverage ratios - those commonly get redeveloped as infil SFR projects. In which case the market value is as land.

I'm appraising a vacant land parcel right now that is owned by a religious group who thought the parcel had to be developed as a house or worship - except it doesn't; and the HBU is as an SFR subdivision.

.

 

[Scott Cole]

Churches sell, so I prefer to do a Sales Comparison Approach. Location is probably the key consideration.

 

[Terrel L. Shields]

Churches sell, so I prefer to do a Sales Comparison Approach. Location is probably the key consideration.

Adjustments? I recall a court case where a golf course contested the assessors valuation. The appraiser used sales and income approaches to argue for lower valuation. The assessor had hired a nationwide golf course appraiser but he did not appraise the course. He testified that the best approach was the cost approach and was recognized by appraisal literature as the best approach for special purpose buildings. The judge accepted the assessors cost approach value.

 

[Mark K]

Here in the heart of the Bible belt there are a lot of church sales.

I've appraised 6-7 over the years, smallish size (10,000 s.f. or less) and usually older, 20-40+ years. There's a lot of comps so a SCA is reasonable and credible.

Its surprising how fast some of them sell when listed. There's always a splinter group breaking away from a large church wanting to start their own.

Alternate uses for some have been: Day Care facility, Wedding chapel, and one was converted into a Town Hall. These were the old ones that suffered from a lot of various obsolescence. The older ones sold for about $15-$20/s.f., the newer ones about $60/s.f. with some in between.