Churches, Synagogues, Temples, and Mosques

A place of worship is a different kind of animal for a commercial real estate appraiser. A place of worship is not built to produce rent, so the tools of appraisal that relate to income analysis are useless. A place of worship is a special use property. The Cost Approach is typically recommended as a preferred method of valuation for special use properties. But in the valuation of a place of worship the Cost Approach is more misleading than helpful, invariably producing value indications that miss the mark on the high side.

The best method of valuation for a place of worship is the simplest and most direct method, the same method that works best for houses: the Sales Comparison Approach.

A look at prices for places of worship in transactions in Greater Boston in the past decade shows a pattern: numerous sales in the price range of $600,000 to $1,000,000, and only scattered sales at prices above that level. Finding a buyer for a place of worship at less than $1,000,000 in an urban location is not difficult. A number of small congregations may be able to afford that price and may compete to buy the property. Above $1,500,000, finding a buyer can be more difficult. Only a large, established congregation can afford that, and most of those already have a home.

Some guidelines for applying the Sales Comparison Approach to a place of worship are in order. The Sales Approach is direct, but pitfalls in its application can make it less than simple.

Weeding - More than for other property types, weeding out misleading market data is important. The congregation selling its home may be more interested in finding a buyer that will carry on some of its traditions than one that will pay the highest price. Some sales of places of worship are at bargain prices for that reason. It helps for an appraiser to be aware of the circumstances of each comparable sale. Some places of worship are sold for alternate uses, like multi-family redevelopment. A sale like that belongs in an analysis of the value of a place of worship for redevelopment and not in an analysis for continued religious use.

Cost Approach Creep - An appraiser looking for comparable sales, eager to make use of the sale of a building extensively remodeled by its buyer, may want to use the purchase price plus the rehabilitation cost as the "price" paid in the sale. For instance, an appraiser might know of a building that sold for $1,000,000 and that was upgraded at a cost of $1,500,000 and call that a "sale" at $2,500,000. But that creates problems. The thing that was sold was not the remodeled building. The fact of the sale does not tell us that the property would have sold for $2,500,000 once it was remodeled. Those $1,500,000 upgrades may have been specific to that buyer's needs: a baptismal pool, a large classroom wing, or architectural features that are of meaning to only one group of worshipers. Who can say how the market of buyers would react to upgrades like those? The appraiser who uses the information as a "sale" at $2,500,000 has allowed the $1,500,000 upgrade cost to creep into the analysis of what was really just a sale at $1,000,000. Cost is not necessarily value. In the case of places of worship, cost and value can differ by a lot.

Location - The best location for a place of worship is not necessarily the community with the highest-priced houses. Dorchester may be better able to produce a high price than Weston. What produces value is demand. Demand may be stronger in a low-income, first generation immigrant community than in a Route 128 suburb. Dropping our preconceptions about what constitutes a high-value neighborhood for residential or commercial use can be helpful in evaluating a church's location.

Some places of worship are striking for what they accomplish through good design. Others are less than successful. Architectural experiments from the 1960s today often come across as lacking inspiration. But one of the most beautiful churches that this appraiser has seen is a 1960s Catholic church "in the round" in Rhode Island. Light from a skylight at the peak of the roof filters down through an intricate hanging webwork above the altar, producing an ethereal, maybe spiritual, effect. In the renovation of a traditional white clapboard Protestant church, architects found the building's original color under layers of paint. The building, repainted its original tone, makes a connection for the congregation to its history. And in Wellesley, a new synagogue incorporates elements that are reminiscent of where Judaism began: a wall like the Wailing Wall; a hidden garden behind the wall, revealed slowly as worshipers pass down the entrance path; and, everywhere, stone that is the color of stone from the Holy Land.

A place of worship can benefit from the artful use of techniques like these, making the connection for the congregation to God, to its history, or to its distant roots.

Then again, some congregations do just fine in re-purposed industrial buildings. After all, what is a congregation's basic need? It is mainly a place to meet. If all else fails, a big, open industrial space may be good enough.

Styles change for places of worship as they do for any building type. The big, impressive pipe organ may still be there, but it is likely out of use. More often, the music makers are up on the altar, with microphones, amplifiers, and a drum kit behind a sound-damping plexiglass wall. The hours-long Sunday sermon is a thing of the past. The future looks more like jubilation. The new congregations worship in a lot of different languages. And they want a place to sing.