Appraising Church Facilities

Church facilities are usually classified as Special Purpose Facilities, or Limited Market Properties. A Church’s unique design is usually intended to meet the needs of a specific congregation, therefore Church buildings usually lack adaptability to other, more conventional uses. Consequently, title to Church buildings and facilities is transferred infrequently, which results in few comparable property sales.  The two most common reasons for Churches to change ownership are one, the congregation has outgrown their current facility, or two, the congregation has declined in membership, attendance and or financial capability and can no longer support their Church facility. Because there is no recognized income approach to valuing Church property, most appraisals of Church facilities incorporate only the traditional cost approach to value and the sales comparison approach to value.

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In general, an appraiser’s role is to research, interpret, and report on the available evidence that supports a value estimate equivalent to the future benefits potential from a specific property. Despite numerous standards and guidelines, the appraisal process leaves room for professional differences of opinion that arise from an individual appraiser’s research and interpretation of market data. It is not uncommon to find existing, as well as newly-constructed Church facilities often appraised well below their actual cost of construction. Due to reasons mentioned earlier, such as the fact that Church facilities are Special Purpose Facilities, few comparable property sales, and lack of a recognized income approach to valuing Church property, many conventional lenders, particularly those that do not specialize in Church lending, will restrict a particular Church congregation’s borrowing capacity through a lower loan-to-value requirement.