How do I know how much my church property is worth?

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You have likely landed here because there are conversations going on in your church about trying to understand the value of your church property. How in the world do I know how much my church property is worth? Where is the church property version of Zillow? You have landed in the right spot. Our aim is to help you through this process. There are many opinions about how to value a piece of real estate, but church properties are very unique, and thus require a unique approach. The approach that we detail in the guide to download is a blended approach of a few different methods of valuation.

Here at the Churches For Sale Group we strive to partner with church leaders. We are helping churches steward their spaces with wisdom and mission in mind. You likely see a decision point coming, and maybe you feel ill-equipped to navigate it. Don’t stress, we hope to help you navigate this season by offering resources, coaching and potentially even helping you market your church property if you are walking towards selling.

First let’s understand how real estate property values are come to, and then how we take those principles and apply them to churches. We hope that this resource takes you further into you journey with wisdom and mission in mind.

Overview of Property Valuation Approaches

Sales Comparison Approach

This is the most widely accepted method in real estate valuation, and the most common we see in church real estate (but we will argue later it does not tell the whole story). Here we analyze recent sales of comparable properties-if you are looking specifically at churches, then you would want to compare to other similar church properties. Adjustments are made for differences in property size, condition, amenities, and location. The challenge: church sales are infrequent, and each property is highly unique, so finding true comparables requires deep market knowledge and research. It requires a specific database to research and find the right properties.

Income Approach

This method is typically used for income-producing properties like apartments or office buildings. Since churches do not generate rental income in a conventional sense, and congregational giving does not transfer to new owners, this approach is not applicable for church properties.The only way we would consider this in our valuation process is if there was a long-term lease with this property that “runs with the property.” This means that it transfers with the property ownership.

The perfect (and somewhat frequent) example here might be a cell phone tower that the church still owns the rights too. We have seen so many churches put in cell towers for the income, and then they will sell the rights to that property and the income to the cell tower company for a lump sum. If you the church still owns this, you can include it in the valuation process. You might even have an option to retain this and not include it in the sale of the property.

Cost Approach

We estimate what it would cost to rebuild your church today using current materials and labor, then subtract depreciation for age and condition, and add the value of the land. This approach is especially useful when there are few comparable sales or when the property is highly specialized.This is a great tool, but again it does not tell the whole story.

What approach fits the best with church properties?

At ChurchesForSale.com, we have found that the most reliable value estimate comes from a weighted average of the Sales Comparison and Cost Approaches.

Here’s how our process works:

Detailed Property and Market Analysis

We begin with our due diligence process. We will ask a ton of questions. We will gather information. We will ask for blueprints.

We will take all of the information provided and begin to create your personalized church property valuation. Some call this an “Opinion of Value.” These are often produced by brokers or sales agents when they recommend a price to list the property at.

After we gather all of the information we conduct our location research. This is going to include area research around the church property, demographic studies, zoning studies, etc. We will begin to formulate our professional opinion during this stage.

We will then look to gather the comparable sales in the area. We will look for church properties that have sold in the area. We have a national database that we pull from, and if the area is unique then we will be touching base with area experts to aide us in the process.

Do you work with Brokers or Sales Agents and assist in the valuation process?

Yes! We would be happy to work with a broker or sales agent to help them produce a valuation. The number one thing we have seen that slows down a church real estate sales timeline is improper valuation. If we can help in the process we welcome the partnership with your local broker or agent.

Cost Approach Calculation

This is the part of the process where we start to bring in the cost approach or Replacement Cost Estimate. We use up-to-date, region-specific construction data to estimate the cost to rebuild your facility today. We partner with a group that provides us with the area information so we are working with data that is locally correct.

Next we run a depreciation assessment. Depending on the age and type of the buildings there are different ways to calculate We account for physical wear, functional obsolescence, and external factors that may affect value.

The final part of this phase is determining the value of the land the buildings sit on. A land value analysis determines the current market value of the land, using comparable land sales zoned similarly to your property.

Blended Value Determination

Now we dive into the numbers and begin to use our years of professional and ministry experience and look at Weighted Averaging. We assign weights to each approach based on the quality and quantity of available data.

For example, If there are many recent, relevant church sales and your property is in excellent condition, the Sales Comparison Approach may be weighted more heavily. But if your property is highly unique or in an area with few comparables, the Cost Approach may carry more weight. Professional Judgment then enters the equation and our experts use years of church property experience to fine-tune the blend, ensuring the final value is both defensible and market-accurate.