What is the Value of my Church?
Determining the value of most real estate is both an art and a science. Many factors such as type of property, the condition, usability and size of the building, amount of parking, as well as its location and recent sales comparables for similar property are all weighed when attempting to value a property. Assigning a sales price to a House of Worship is perhaps the most challenging assignment most real estate professionals will ever do. Unlike selling a house, where every street has many comparables and it is easy to put an educated guess as to what a given property might sell for, Houses of Worship tend to be unique properties without many similar comparables.
When valuing a church prior to marketing it, I look at ten major factors and dozens of little ones. Even with more than thirty years experience in building, renovating and selling churches, placing a realistic value on a church for sale is still one of the most difficult tasks that I regularly do. Here are just some of the factors that go into placing a value on a church of house of worship.
1. Location - Is the property desirable to a growing congregation searching for their new church home? Is the church easy to get to, highly visible, in a perceived safe location, on the correct part of town, close to members' homes, or new communities that offer growth opportunity for the purchasing church?
2. Building - Is the architectural style, functionality of the building and overall repair of the building desirable to potential church buyers? Does the building offer the size sanctuary, number of offices, classrooms, meeting rooms, type of kitchen and fellowship hall that a buyer in the market would be willing make an aggressive offer to own?
3. Replacement Cost - If a buyer were hiring a builder to replicate the building exactly on the same lot, what would it cost on a per square foot basis to do so? What would the same parcel of ground sell for today without a building?
4. Highest and Best Use - Is selling the existing church the highest and best use for the property? Is the land more valuable for redevelopment than simply selling the church itself?
5. Seating Capacity in the Sanctuary - What is the seating capacity of the sanctuary? Typically, buyers are looking for sanctuaries that seat from 300 to 900 in fixed seating, pews, chairs or theater seats.
6. Parking - In most jurisdictions Houses of Worship are required to offer parking at a ratio of one parking space for every three to four automobiles. Many churches built in cities nearly a hundred years ago were built to accommodate services of many hundred or even thousands of people, but they were built during a time when nearly everyone walked to church. Consequently, even though these magnificent properties couldn't be replicated today due to their replacement costs, they don't command a high sales price unless suitable off-site parking can be located. In today's world, the maxim is true, "If you can't park them, you can put them in the pews."
7. Demand - The law of supply and demand is a powerful force in determining a property's value. If there are many churches for sale at a given time, but the demand to purchase churches is moderate to non-existent, even the finest church property will see a diminished value when placed for sale. Conversely, if the demand for churches is high but the number of churches available to purchase are few, the value of those churches on the market will increase in value.
8. Barriers to Entry - If factors, such as available land, time required obtaining building permits, or cost of new construction, make it difficult to build a church, then the value of existing Houses of Worship will increase. If, however, the availability of land is great, its cost cheap, and the cost of new construction reasonable, then the value of existing church property will probably not increase greatly.
9. Cost Barrier - There is some value above which most congregations will not pay regardless of replacement cost for an existing property. If a property in excellent condition had a replacement cost of $5 million dollars, the threshold to purchase this property would require the buyer to have a minimum deposit of $1 million and finance the remaining $4 million for 20 to 30 years at a monthly mortgage payment of approximately $24,000. Many congregations would look at a property with this cost barrier as too expensive regardless of its condition or replacement.
10. Availability of Funds - Today, borrowed funds are more difficult for most churches to obtain. The amount of money they qualify to borrow, as well as the terms and rates under which they can borrow them, will ultimately help dictate the value of a selling property. When money is cheap and terms liberal, the value of real estate can increase. When the opposite is true, the value of real estate decreases.
11. Condition - Is the church in excellent condition or poor condition? Will the purchaser soon be replacing expensive equipment, such as a boiler or air conditiong system? |
