AD REAL ESTATE CHURCH PROPERTY SALES

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Why you need a specialist to sell churches and other religious facilities

January 15, 2022

Table Of Contents

New developments and big property deals involving church-owned properties are on the rise in the United States and Canada, particularly in cities grappling with affordable housing and dwindling church membership.

Church-owned properties are considered special purpose buildings that must go through a unique selling process. If you’re considering selling church-owned property, here’s what you need to know about the selling process.

What makes buying and selling church-owned properties unique?

Your congregation may decide to sell its building for many reasons. Perhaps the church is growing, closing, or pursuing a different ministry model. No matter the reason, you must follow specific steps when selling specialized buildings like church-owned properties.

Aside from establishing property value and developing and uploading marketing collateral, as you would a home or office, selling church-owned properties differs from typical real estate sales in the way these properties are inspected, valued, promoted, and negotiated with buyers.

For instance, the transaction must follow Church law governing the sale of church buildings that will no longer be used for worship. Once the Cardinal relegates the property for sale, all sacred items must be removed from the premises, and it must be sold for “profane but not sordid” use, or in a dignified and appropriate manner.

Relegating church-owned property for sale usually involves securing the written permission of the district church. This is an important step in the selling process because the title to most church buildings is typically held by the church as an incorporated entity.

Moreover, there are unique requirements for insuring the title to a church-owned property, including:

  • Certificate of Incorporation/Proof of Incorporation
  • Articles of Incorporation
  • Bylaws, Rules, and Regulations of entity as a corporation or as operated by trustees
  • Corporate Resolution authorizing the sale, purchase, or financing of sale

There are additional steps for congregations that are not incorporated – your agent may offer guidance on how to gather the necessary documents for incorporation.

Once a church building has been relegated, it may be appraised and marketed for sale. Buyers will be encouraged to contact the Archdiocese.

Funds from the sale of a church-owned property are typically utilized for direct support of other parishes. Any sacred objects left over from the sale will be catalogued and offered to other parishes and church buildings.

That’s why it’s important to work with a real estate team that cares deeply about church groups and genuinely wants to create positive outcomes for the church and its members. Whatever your reasons for selling, your agent should handle the matter with tact, discretion, and respect.

 

Common problems encountered by churches nationally

Many church-owned properties have been under fire in the United States over the last decade, with nearly all subsets of the religious population significantly down. This has only been exacerbated by the COVID crisis and the ban on large gatherings that has gradually been relaxed across the country.

Moreover, an increasing number of Americans consider themselves religious “nones”, or individuals who don’t identify with any religion, describing themselves as agnostic, atheist, or “nothing in particular.”

Low attendance and retired administrators with limited new staff or attendees donating time or money can be crippling for congregations. Whether Protestant, Catholic, or Jewish, low attendance is ecumenically blind and the impacts can’t be avoided anymore.

Leaders also cite the burden of ongoing maintenance costs, particularly for older church buildings.

As a result, religious institutes are downsizing. The Churches and Jewish religious communities are being driven to sell churches, temples, convents, and monasteries, along with higher and lower educational facilities, and nonprofit medical facilities.

In most instances, the sale is emotional. Local religious owned properties need to be repurposed to preserve the mission of the church in new ways by repurposing valuable property to shore up the religious nonprofit.

The problem confronting the religious patrimony can be measured statistically to appreciate the significance of the property value and volume. But the real problem is the human or personal factor where our religious providers – our rabbis and ministers, priests and nuns– need our help because the consequences impacting their personal lives is traumatic.

 

Questions to ask when selling church properties

Why are you selling? – As mentioned earlier, church leaders have various reasons for selling. Whether you’re downsizing, expanding, or ending your ministry, it’s important to be clear about your reasons for selling because the transition will likely be very stressful for the whole congregation. Getting the congregation on board and managing their expectations are critical to a successful sale and a smooth transition.

In many instances, the selling church also fails to anticipate just how much work goes into a sale and ends up not having enough time or staff to follow all the necessary steps.

A related question would be: why is the buyer purchasing church-owned property? It is equally important for sellers to be aware of prospective buyers’ reasons and objectives as these will have an impact on the transition.

Moreover, church members may object to the buyer’s goals and intended use for the property, creating tension and conflict that can make the transition even more difficult.

How much are you selling for? Congregations must also take steps to protect themselves from unfair transactions as many are taken advantage of throughout the U.S. and Canada. The overtly low valuation of religious properties, for instance, goes against the best interests of the congregation. Unfortunately, there are non-church buyers, developers, lenders, and brokers who place little value on the mission-driven purpose of church buildings, not realizing that these properties served as important spaces for prayer, mass, baptismal, weddings, funerals, food programs, and philanthropy for decades or perhaps centuries.

And because church-owned properties, particularly houses of worship, tend to be single-purpose buildings that are not well-suited for residential or commercial use, non-church buyers need to take the costs of demolition and redevelopment into consideration when making an offer.

To protect their congregations, church leaders must choose their buyers wisely. They must also be aware of how real estate value is appraised. There are three methods for determining the value of church-owned property, including market valuation, professional appraisal, and insurance valuation.

Working with a broker who understands the mission-driven purpose of church buildings will help you come up with a fair estimate of the property’s value.

Who are you selling to? An increasing number of developers aim for church-owned properties due to a shortage in conventional parcels with the knowledge that congregations struggle with declining membership and mounting bills. Many criticize this practice as predatory while others see it as a necessary evil.For instance, tax classification records from the Manhattan Borough President’s office show that dozens of houses of worship and similar properties in the borough were either redeveloped or razed to make way for other uses.

Again, this is why church leaders must be mindful of who they choose to sell to. Does the buyer have the congregation’s best interests at heart? What are their ties to the community?

How many people can the building accommodate? When determining the value and desirability of the property, developers, lenders, and brokers will look at how many people the church building can accommodate. So if you’re thinking of selling, look at the church building’s seating capacity, square footage, and so on. This will help you manage your expectations.

What is the overall condition of the property? Some church-owned properties may require so much repair work and clean-up that prospective buyers won’t even consider making a fair market offer. To put buyers at ease, make basic repairs and cosmetic improvements. Make sure all knobs, locks, lighting fixtures, switches, toilets, and faucets are working properly.

If you’ve fallen behind on maintenance and repairs because of the cost, you should at the very least clean the property and remove all trash and clutter on the premises. Steam clean soiled carpeting, wash the floors and windows, and trim the grass and trees and to give the property a well-cared for appearance.

Are there any internal disputes? These kinds of disputes arise when a disagreement among congregation members, or between the congregation and its national denomination, escalates to a legal battle for control of church-owned properties, financial assets, and the use of the church’s name.

When selling a church building and other properties, it is important to ask other members of the congregation if there are any ongoing disputes that might affect the sale. Make sure all internal disputes are settled before putting the property up for sale.

What is your long-term vision? You and your congregation must share a common long-term vision before engaging brokers and prospective buyers. Start a discernment process that will help you meet short-term objectives while staying the course on the ministry’s long-term goals. This process is often emotional and will require proactive communication from church leaders.

Make it clear to church members that the congregation’s legacy isn’t tied to physical property. It is more about the spiritual impact on members, their community, and the world.

How will you protect your congregation from risk and liability? Real estate transactions involving church-owned properties are complex and require large amounts of paperwork. There may also be issues regarding deed restrictions, zoning, water certificates, and liens and encumbrances that could potentially cause a sale to fall through.

For example, can your congregation prove that it is exempt from real estate taxation? Can you give a clear title and sufficient zoning documentation?

To protect your congregation from risk and liability, it is crucial to have a representative who will review all contracts, permits, agreements, and other documents to ensure a smooth transaction.

Who’s representing you? This is where the difference between a religious broker and a secular broker comes into play. As already mentioned, it is important to work with a broker who understands not just the unique steps to selling church-owned properties across the U.S. and Canada, but who is also sympathetic to the difficulties and challenges of the transition.

Your broker should strive to create the best possible outcome, not just for the sale, but for the congregation and its members. They must be sensitive to common issues faced by church leaders, from the mounting costs of church building maintenance to internal conflict and disputes. These issues must be handled with tact, sensitivity, and discretion.

Keep in mind that members who are brokers aren’t always the best representatives, either. A conflict of interest arises because it is unclear whether they are working for the church or their own personal gain.

Although many will volunteer to help sell your church building, they may not understand the complexities of selling church-owned property, especially if they are more accustomed to selling residential or commercial real estate.

 

Steps to selling Church properties

  • Research – In the spirit of good stewardship, church leaders must take it upon themselves to do careful research and study the real estate market in order to make the best decisions for their ministry. Exploring your options can help you develop a better understanding of risk and value to help protect your interests.
  • Approval – If you’re selling church-owned property that will be redeveloped and repurposed, it is crucial to secure approval for residential or commercial use before the sale takes place. The sale is more likely to push through if buyers know that the property has all the necessary zoning permits for residential or commercial use.
  • Permission – As mentioned earlier, the church building must be relegated by the Cardinal or district church before it can be marketed for sale. This requires written permission from the concerned church leaders.
  • Valuation – There are several ways to determine the fair market value of special use buildings. For the best valuation, make sure that the property is in good overall condition and work with brokers and lenders with experience in dealing with church-owned properties.
  • Promotion – Once you’re ready to put the property up for sale, prospective buyers will be encouraged to get in touch with the Archdiocese. To get good offers, make sure that the premises are clean, take good photos, and make obvious repairs. Your agent will help you prepare the property for viewings.
  • Negotiation – Vet offers and choose the best buyer for your church building with the help of a broker. Working with an expert who has strong negotiation skills will help protect your interests and allow you to secure a fair price for the property.
  • Closing – Once you come to terms with the buyer, and you’re certain that they have the best interests of your congregation in mind, you can close the deal. You must transfer the title and other relevant documents to their name.
  • Transition – Now comes the challenging part, which is the transition to a new church building, downsizing to a smaller property, or perhaps closing your ministry. The transition will be much easier if you can revisit your reasons for selling and long-term vision for the congregation. Communicating the objectives of the sale to church members and getting them on board the transition will also help you pull through.

 

Work with A.D. Advisors today

A.D. is the only firm exclusively selling religious non-profit properties in North America. Our company has created the Religious Platform – a massive undertaking worth over $3.7 trillion throughout the U.S. alone.

Our experience working with the Religious Platform is vital as it gives us a clear understanding of the religious versus secular patrimony compared to your average real estate company.

As a Member of the Counselors of Real Estate (CRE), which offers real estate analyses and action plans for non-profit organizations, our in-depth knowledge and long transactional history of religious non-profit work make us the most trusted name in the sale of church buildings.

Closing

Making the decision to sell church-owned property is never easy. It’s not always about the money – it’s about what’s best for the congregation and the community they have supported for decades or centuries.

A.D. Advisors are here to help. You can reach us here. You can also contact us at Info@ADAdvisors.org and 630.606.9000. We specialize in church buildings, monasteries, faith-based schools, acreage, and various kinds of church-owned property.

We take an individualized, relationship-building approach to real estate. We offer person-to-person, soul-to-soul attention to detail when executing sales and other transactions.

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