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Church - Comparable Sales

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Jayne Parrish

Freshman Member
Joined
Mar 6, 2006
Professional Status
Certified General Appraiser
State
Tennessee
I am appraising a church and they need a market value not use value. There are sales of older, smaller churches close by but my subject is only about 10 years old and the main building is close to 20,000 sq. ft. And the biggest problem is that it not any where near a metropolitan area. I have found some sales in or close to Memphis and Nashville. But the population of the whole county is under 35,000 and nearest city is about 50 miles. I have looked and still need at least one sale that is reasonably similar to my subject. I even emailed a company in KY that advertises that they appraise churches all over the country and asked if they had any sales and what the fee would be for the info. I did not even get a response. The subject is in western Tennessee but I obviously I have to expand my search area. So I need a sale that is preferably not in or close to a city, with a building over 10,000 sq. ft. and less than about 20 years old. If you don't know of a sale, I would appreciate any suggestions on how to find one since I am running out of ideas.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
If 10 years old, is it not red iron construction? If so, it may have competing HBU's...if traditional brick, steeple, etc. sol. But I would start with seeing how much they spent 10 years ago. Use cost book historical cost index and estimate current costs does it act more like trimmed out metal bldg? or, traditional design? Then run the CA and compare. Once I do that, go where the comps are and vet land values first and foremost. Once you've made that adjustment do straight line age physical deprec on the comps and determine the functional/external ob. (RCN - PD v SP - land value= diff = Fun/Ex Ob). Do all comps same way...Purity of application
 

leasedfee

Member
Joined
Oct 14, 2007
Professional Status
Certified General Appraiser
State
Colorado
And the biggest problem is that it not any where near a metropolitan area. I have found some sales in or close to Memphis and Nashville. But the population of the whole county is under 35,000 and nearest city is about 50 miles.
Those sales may be appropriate. (1) Figure out the underlying land value for the comparables and the subject, adjust.
(2) You likely/maybe have an over-improvement for the neighborhood. Next, would there be external obsolescence as there would be lack of a market for the subject? How many large congregations does 35,000 people support -- not many I'd imagine; look at the typical religious facility size in the subject's market. Only the Catholics may be able to pull down such a large building, one buyer does not make a market. This may lead to an external obsolescence adjustment in cost and sales comparison approach, possibly being calculated as the additional holding time/costs until it is absorbed by the market. The cost approach generally assumes fairly immediate occupancy. I presume you're doing a cost approach for this?
(3) What is the backup highest and best use if not a church? Convert to a civic/fraternal/event center? Is there a market for this, and if so comps? Event/fraternal centers sometimes sell at a discount, and civic buildings lose taxpayer's monies, and this is the obsolescence for these buildings in unsupportable markets. You need to perform more Fundamental Analysis than we typically do.
 

Jayne Parrish

Freshman Member
Joined
Mar 6, 2006
Professional Status
Certified General Appraiser
State
Tennessee
Those sales may be appropriate. (1) Figure out the underlying land value for the comparables and the subject, adjust.
(2) You likely/maybe have an over-improvement for the neighborhood. Next, would there be external obsolescence as there would be lack of a market for the subject? How many large congregations does 35,000 people support -- not many I'd imagine; look at the typical religious facility size in the subject's market. Only the Catholics may be able to pull down such a large building, one buyer does not make a market. This may lead to an external obsolescence adjustment in cost and sales comparison approach, possibly being calculated as the additional holding time/costs until it is absorbed by the market. The cost approach generally assumes fairly immediate occupancy. I presume you're doing a cost approach for this?
(3) What is the backup highest and best use if not a church? Convert to a civic/fraternal/event center? Is there a market for this, and if so comps? Event/fraternal centers sometimes sell at a discount, and civic buildings lose taxpayer's monies, and this is the obsolescence for these buildings in unsupportable markets. You need to perform more Fundamental Analysis than we typically do.

All good comments. I have thought about most of them already. This area always has limited sales and land values vary substantially around here so I always abstract the land values and then compare improvements. This is the Bible Belt so we have 4 churches (including the subject) about this size within 4 miles of it. And all are thriving. Plus we have a lot of smaller churches. Very likely some external obsolescence but the last time a church of any size was for sale here, it sold within about a year to a congregation that was needing a bigger building. And, as is typical with any commercial property around here, I have too few sales to determine accurate adjustments for differences. I will do cost approach and try to determine how much to discount it for a longer marketing time. As far as backup highest and best use, that is a tough one. We have a university here so their facilities are used for a lot of group events. The high school football team here even uses their field. I deal with very limited sales all the time but this is worse than usual. So I was hoping for one good comparable sale. But it is like looking for a needle in a haystack. Thanks for your comments!
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
the last time a church of any size was for sale here, it sold within about a year
Go back, analyze and break out those land and obsolescences and the same obsolescences likely still applies. Don't worry about "longer marketing time" as your obsolescences will reflect same. Again a traditional church v. metal building church. I find both RCN & obsolescence is higher in traditional building, and haven't seen a traditional building built in a long time. Traditional many be 40% F/O or more.
 

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leasedfee

Member
Joined
Oct 14, 2007
Professional Status
Certified General Appraiser
State
Colorado
his is the Bible Belt so we have 4 churches (including the subject) about this size within 4 miles of it. And all are thriving. Plus we have a lot of smaller churches. Very likely some external obsolescence but the last time a church of any size was for sale here, it sold within about a year to a congregation that was needing a bigger building.
Discuss this in your H&BU analysis, and so on. This discussion then supports that there is not any EO, or if any it is minimal of a small above-normal holding period (e.g., 12 months exposure minus 6 months stable = 6 months of EO so a present value factor multiplier of x0.96ish, or 1-0.96ish = -4%, if any).

Alas, the one good comp may not exist. You may have to be convincing on several sorta good comps and "triangulate" towards your subject. Don't be afraid to expand the geography or the time frame. I've gone back 7 years and even 10 years on really unusual properties and then make market condition adjustments, if any, which in a healthy market will track inflation in the long-term. And have found that the market is pretty rational considering things. Pulling out the land value is helpful too to get the building residual. Granted, it is not ideal but a good ancient comp may be the key to determining the subject's actual value, and the bad recent comps keep the under-writer/reviewer off your back. Sometimes you have to troll the assessor's data to see if there was a sale of a similar building 5 or 7 or 10 years ago (or just to find out a land purchase price). I've hunted-and-pecked for sales of every small town opera house and vintage movie theatre in my state no matter when.
 

Walter Kirk

Senior Member
Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
I have appraised several churches in the last few years and I have found plenty of churches which were reused as schools, community centers, homeless shelters etc. In addition several churches in my area have been demolished for commercial use. Revisit your H&BU analysis and consider sales of properties with similar characteristics to your subject which are not churches.
 
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