Church - Dom? Adjustment

[Terrel L. Shields]

Typically churches that lie in a residential area (not on a busy commercial lane) seem to languish on the market for one to three years here. Only another church or some institutional use creates a sale. There are any number of ways to discount for the time value of money. Used to be an old saw that two to three times the Money Market rate or similar length T Bill rate was about right. With a 3 year T bill down in the pits, that certain does not work. I have been applying the local commercial rate as a discount. What/how are you using when discounting for time value of money in a sale where the DOM is likely to be three years?

 

[Gobears81]

If I understand the scenario correctly, there wouldn't be any discounting necessary in determining market value. 3-years is the exposure time- ie how long it would be listed prior to that date- and you use market data as of that date to determine the value.

 

[J Grant]

If 3 years is typical time to sell, translated to market exposure, then it is. If a church had to be sold fast, for example in 6 months, one would presume a price cut or incentives would be needed to move it faster than typical.

 

[Terrel L. Shields]

3-years is the exposure time- ie how long it would be listed prior to that date- and you use market data as of that date to determine the value.

If I am predicting a marketing time of three years for a current value, why would I not discount for the time value of money?

 

[nstanbru]

If I am predicting a marketing time of three years for a current value, why would I not discount for the time value of money?

You referenced DOM in your original post.. If your data sources report DOM similar to the way the sources I use, it seems to me you're talking about exposure time, not marketing time, as stated by Gobears81. Or maybe I'm just not understanding your 1st post.

 

[Michael S]

If I am predicting a marketing time of three years for a current value, why would I not discount for the time value of money?

Because as of the date of value you are assuming the subject property has been exposed to the market for three years (i.e exposure time). If your client wants to know what it would sell for three years from now after it's been marketed (i.e marketing time) then you would have a prospective value. Alternatively if they wanted the value with a marketing period of 12 months it would probably require a discount to sell it more quickly.

 

[Terrel L. Shields]

I have to predict the marketing time on the basis of the past days of market right? Since I have more over two years than under, I am predicting a three year marketing time. I mean I have no market evidence to support a "quick" sale and for a church, you have a very limited pool of buyers. Only one comp sold quickly and that was due of being in the way of rapid commercial build up in the area. So I predict that the property may take three years to sell thus requires a discount from that future prospective value. I provide both and justify the discount rate. I am asking what basis do you support the rate upon?

 

[J Grant]

what future date is your prospective value?

 

[normando]

Highest and best use is probably tear down the church and build housing. I see nonresidential use lots in residential zoning languish for long time. Even homes near churches usually sell lower (some cultures don't like it).

 

[Terrel L. Shields]

ighest and best use is probably tear down the church and build housing.

not a chance. Building lots fully developed are running $25,000 and marginal ones can be found for $10K. The site is visible from major highway but no access and is zoned institutional.