Church Appraisal Challenges

Church properties (AKA religious facilities) can have a variety of improvements that can include properties with a single multi-purpose building improvement on them that could easily be converted to a "for profit" use or they can have a special-purpose sanctuary buildings with spires, bell towers and fifty foot plus wall heights and have absolutely no possible alternate use.  In my experience most church properties are designed for their special-purpose use and cannot be easily converted.  

Appraising church properties presents a challenge to appraisers who are used to working on typical retail, office and industrial buildings, since most of the emphasis in those appraisals is often placed on the income approach and the sales approach.  While a market does at times exist for a church property it is a usually a small, niche market with relatively few participants.  There is, of course, usually no income to analyze so in a way the appraiser is given a break from having to consider it.  

In my market there is always some data on church sales.  It's often only a few transactions in any given year, but I never ignore them, and I am often surprised by what I find.  Stand alone churches and churches with detached school building are popular configurations and I usually complete a sales approach and discuss in detail the limited nature of the market.

Of course the cost approach is the methodology that appaisers usually rely upon when valuing properties of this type.  As an appraiser who always looks at the cost appraoch when valuing a wide variety of commercial property types and I have found in recent years that its value conclusions "miss the mark" when compared to the other approaches.  The values that I conclude are usually high, and that induces me to take a closer look.  If I have found that the cost approach is always 10% to 20% higher than the other appraoches I take that fact into consideration when completing similar assignments.  Some appraisers explain the cost error as "external obsolescence."  

The question you have to ask yourself as an appraiser is, "will the cost appraoch results for my church property also be inflated?"  or does the "external obsolescence" that you found for other property types apply to the cost data for church properties?

For more appraisal information contact Glenn Rigdon, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.   

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