The Religious Facility Appraisal – Part I


Individuals and congregations have many reasons why they may need an appraisal of a religious facility including new construction, financing, a potential sale or purchase, insurance purposes, or asset valuation tied to a number of financial decisions. While religious facilities may not sell on the open market as often as other property types, there are still a number reasons that can lead to the sale of a religious facility including a changing neighborhood, a growing or shrinking membership, or facilities whose physical life has generally ended. These factors indicate the need for the appraisals of religious facilities.  However, the appraiser has to answer some important questions when appraising this unique property type.

In the highest and best use analysis of a religious facility, factors such as the need for a church in an area, available parking, fixed seating, and neighborhood characteristics all must be considered by an appraiser. Furthermore, church leadership and members are important factors when considering the highest and best use of a currently operating religious facility. Depending on these factors, the highest and best use of the facility could be the continued use of a religious facility or an alternative use that is better suited for the surrounding area.

Religious facilities are typically considered a special-use property built for a specific purpose. While sometimes alternative uses do exist, religious facilities are typically most efficient when fulfilling their intended use. Due to the special-use characteristic of religious facilities, often times a value-in-use may be required by the client. However, if the intended use of the appraisal is related to financing purposes for a federally-insured transaction, the appraiser must include a market value. In this case, factoring in alternative uses may become a critical part of the appraisal. It is important for the appraiser to ensure the type of value is consistent with the intended use of the appraisal.

The difference between value-in-use and market value is key when looking at a religious facility’s highest and best use. In fact, examining the value-in-use often helps in determining the financial feasibility of a religious facility. If the value-in-use shows that the religious facility is operating economically, the appraiser has shown that the religious facility is a financially-viable option.   If the use as a religious facility is the highest and best use conclusion, the appraiser will have to take into account the unique characteristics of religious facilities in the property valuation. In the next post we will take a look at how a religious facility can be valued in each of the valuation approaches.