Property types
Valuing property that almost never sells
Churches, schools, clubs, fire stations, processing plants and similar property have no market of comparable sales, so the methods that work elsewhere have to be replaced rather than adjusted.
Method
The cost approach, carefully
Where a property type does not trade, sales comparison has no evidence to work with and income capitalisation has no market rent to capitalise. What remains is the cost approach: value the land at its own highest and best use, estimate the cost of a building of equivalent utility and deduct depreciation.
The method is accepted for this purpose and it is also the method most exposed to disagreement, because depreciation on a long lived special purpose building is substantially a matter of judgement. The contested question is usually functional and external obsolescence: whether a building that serves its occupier perfectly well should be written down because a hypothetical buyer would not want it.
Continued use is itself evidence. A building in active service for the purpose it was built for has utility, and an obsolescence deduction that implies otherwise should be required to explain itself.
Alternatives
Where cost is not the whole answer
Substitute facility
Where a public or institutional owner must continue providing the service, some jurisdictions measure compensation by the cost of a reasonably equivalent replacement facility rather than by market value. Availability varies, and it matters most for churches, schools and public bodies.
Alternative use value
Where the land would be worth more cleared and used for something else, the property may be valued on that basis with the building contributing nothing. That conclusion is correct in some cases and is also a route to a low number, so it should be tested against what the market would actually do.
Questions about special purpose property
Our congregation cannot replace this building for what they are offering
That is the substitute facility argument. Whether it is available depends on the jurisdiction and on the nature of the owner, and it is worth raising early because it changes the whole measure of compensation.
The appraisal says our building has no value and only the land counts
That is an alternative use conclusion. Ask what evidence supports it, and whether the building\u2019s continued use for its purpose was considered. It is sometimes right and it is frequently asserted too easily.
Can comparable sales from another state be used
Sometimes, for property types that trade so rarely that a regional or national search is the only option. The adjustments for location are then large, which weakens the conclusion and should be acknowledged.
Get a valuation question answered
If an offer has arrived and the number does not match what you believe the property is worth, the appraisal behind it is the place to look. Start with the pages below.