Church Valuation

[mightyd]

Hey from Canada,

I'm in a community of about 30,000 and am doing an appraisal on a church with a total area of 24,000 sq ft on a couple of floors. To cut to the chase I've concluded that the only appropriate method is to use the cost approach. There is simply no data to complete the DCA.

So I have my value by the cost approach but to be honest I think it's too high even though I feel that I've nailed both the land value and the depreciated cost (replacement cost). I simply don't believe the property would sell for the final estimate.

Because of the size of the development and the size of the community I'm in there is simply very little market for such a building, even from an alternative use view.

Any thoughts?

Thanks

 

[Pittsburgh Pete]

Your conclusion could best be described as value in use. Market value would require acknowledgement of functional and/or external obsolescence. In our more populated area, sales indicate a signficantly lower value than cost--due to the reasons cited.

 

[Walter Kirk]

Expand your search to similar sized communities.

 

[Mountain Man]

Ditto Pittsburgh Pete, cost probably won't equal market value. The market approach is the best approach for church sales IMO. If you look in CoStar, they have a search feature just for church sales. You may have to go 100+ miles for sales data, but just chose from similar sized communities as noted above. Also make sure the sales weren't razed for redevelopment. Alternative highest and best use are common when dealing with older church facilities in growing areas.

 

[DWiley]

If I had such an assignment my first thought would be to contact Karen Mann, aka "The Church Lady." She is a church appraisal expert. Her contact info can be found using the AI web site.

 

[hglenbetts]

Church valuation, for the most part is a specialty.

With one that I was involved in as an "owner", the appraiser needed to consider not only the square footage values of each unique area ( worship space, classrooms, admin areas, kitchen, recreation etc) but also things like amount of parking vs seats in worship. He had an extensive data base of church sales through out the vast metro area going back for years, and drew from different communities for each comp. We aren't far from metro Detroit, and some of his comps were 30+ miles away.

We just completed a 15,300 sq ft addition at the cost of $2.5MM. His "as completed" value (pre construction) was $3.34MM for the total 29,000 sq ft.

The report itself was about 65 pages of narrative plus other supporting docs.

Look hard, you'll find those comps in other towns, maybe in other Counties, but they're out there.

Good Luck.

P.S. My Mom's family were from St. Marys, north of London, Ontario.

 

[CCAAMO]

Are there any alternative uses for the property other than a church?

 

[PropertyEconomics]

I find that if one searches Churches actually sell quite often. Perhaps not in your community but there will be other communities that will have church sales. You can extract land value and compare on a contributory value per building square foot basis and add land value from your market.
This would be a test against the cost approach and provide a more credible and reliable appraisal.

Best of luck.

 

[CCAAMO]

I've done several that were purchased and then converted to small private schools. That may be a possible alternative use.

 

[Vernon Martin]

I think that your gut is telling you that you have not deducted enough economic depreciation. This is usually why the cost approach tends to come in too high in thinly traded markets. What is the purpose of the appraisal and what definition of value are you using?