Procedure for Property Purchase
Download here: Procedure for Property Purchase
- Request for Property Purchase by Local Community
The Local community with a clear desire to purchase a (church) property can write a request to the District Pastor, the District Council and OBIAD. This request will start the procedure and decision making process for purchasing a property. Buying a church property is a major undertaking and a long term financial obligation to the members. We need to allow time for proper planning and to come to and clear understanding of what the local church needs to grow and prosper. The local community would present a report that includes the below guidelines.
- Real Estate Purchase & Mortgage Guidelines
Since HSA-UWC is a corporation, in order to be legally authorized to buy, sell, or mortgage a property it is necessary to obtain authorization from the corporation’s legal representatives. Church leaders or members are not permitted to sign any documents on behalf of HSA-UWC without first obtaining this authorization. OBIAD can provide you with memos and guidance for these transactions. In many cities or states this is the only property and as such it must allow the community to prosper and fulfill its goals. It is also intended that as the major asset, it will increase in value.
The following are considerations for the planning of a successful property purchase.
- Community Support
If the property is to serve and be supported by the church community, it is important to understand the needs and opinion of the community. The location and accessibility of the property, the functions that it is to serve, and the financial commitment, are all factors that should be polled in the local church community prior to beginning the search for a property. It is important to understand the church needs, its current situation and (building) limitations.
Important Considerations of Your (local) Church:
- Number or Congregation members:
- Average Number of members participating on any given Sunday Service:
- The Average amount of offerings per month:
- How many events are currently organized per week?
- How large does the main hall need to be to facilitate your congregation comfortably
- Do you need auxiliary space such as Sunday school?
- How many parking spots do you need?
- Are the main facilities ADA accessible?
- Are there any proceeds from the sale of a building?
- Present state of the building to be purchased.
- Size of the building
- Estimate purchasing cost
- Estimate renovation cost
- Preferred location
- Create a detailed yearly budgeting plan for your state or district showing the financial impact of this purchase
- Use and Zoning
Before selecting a property for purchase, a clear plan of the intended use and functions of the property should be drawn up. Ideally, this could be reduced to a list of basic needs. Be aware that the more uses that you are trying to perform at a property, the more difficult it is to find a suitable property; once purchased it must be managed within legal guidelines. It is difficult to mix commercial and nonprofit activities. Churches as places of public worship often have requirements for parking, disability access, and public assembly fire requirements such as sprinklers. This may mean that if a residential property is being purchased, it may be limited to a meeting place for prayer and religious study rather than an “advertised” public worship center.
Not only the zoning of a potential property should be checked but the applicable zoning code should be looked at to understand what specific uses are allowable within that zoning category. This can be obtained from the city zoning office, but in the case of a more complex building, an attorney or architect who specializes in zoning may have to be consulted.
Careful consideration should be given before contracting to buy a property with the intention of obtaining a change of zoning (a variance). These involve public hearings which can bring opposition to having our church as a neighbor. They are time consuming, expensive (in that they usually require using an architect and an attorney), and the church has rarely succeeded.
- Physical Condition
It is important to have a clear understanding of the physical condition of a property prior to going to contract. If there is time, an inspection should be obtained prior to contracting to buy, and where appropriate used to negotiate the purchase price. Otherwise, there should be a clause in the contract allowing for an inspection, and an adjustment in the contract price or a cancellation of the contract if there is a problem.
- Purchase Price
In order to ascertain what price to offer for a property, a comparison should be made with similar properties that have been sold in the location. The physical condition should be clearly understood when settling on an offering price. For more expensive properties, an appraisal by a qualified appraiser should be obtained. Buyers expect that the offering price will be negotiated. The initial offer should be less than is intended to pay. Remember that a property is a bargain only if it fulfills our desired uses and purposes, and does not have some drawback which will limit its usefulness.
A clear financial plan should be developed along with the list of basic needs as set out as stated in the “Use and Zoning” section shown above. If the property is to serve and be supported by the local church community, the local committee should prepare the plan. It should include the total amount that will be spent on the purchase, which will include the purchase price, closing costs and any planned renovation costs. The monthly expenses should also be calculated including mortgage payments, utilities, maintenance and where applicable property taxes with the source of income clearly stated.
- Property Tax Exemption
Unless a property already has an existing exemption, and the use is going to be the same, it cannot be assumed that a property tax exemption will be available. Each city sets its own exemption standards. There is customarily a two-prong test: that the owner is an exempt organization and that the use is for an exempt purpose under the city requirements. Many cities only allow exemptions for churches, for places of public worship (not office or residential use). Partial exemptions may be available for mixed-use properties. Exemptions usually have to be applied for in advance for the next financial year. When buying a taxable property intending to obtain an exemption, the taxes for the current year should be included in the budget. To understand exemption requirements and the process of applying, check with the city property tax department.
- Property Maintenance & Personnel
A church property is usually the main asset of the local community and to fulfill all the undertakings set out here requires the work of a capable person (or a committee) with time availability. In addition, once purchased the property should have a property manager to take responsibility for its use, maintenance and finances. It is unrealistic to expect that the local pastor can give this the attention it deserves, in addition to his or her many other areas of responsibility.
As HSA-UWC properties are the major asset of the Church in each state, it is important that the appropriate insurance coverage (liability, fire, flood, etc.) be maintained. OBIAD Insurance representative can provide coverage for properties on our nationwide policies, at very competitive rates. In making the budget for the state or district, allowance for insurance should be a standard item.
- Safety Issues
In any Church property, care should be taken that all applicable local codes are complied with. Fire exits and extinguishers, smoke and carbon monoxide detectors, and window guards (if small children are present) are some of the safety items that may require your attention.
In the event that your city will be taking out a mortgage(s), you will need to fill out the form “Mortgage Loan Summary Sheet” which can be requested at OBIAD@unification.org.
- Real Estate Purchase & Mortgage Guidelines
- District Pastor Writes Request to Purchase Property to OBIAD
The request for Property Purchase from the local community can be forwarded to the District Pastor. The District Pastor will review this request and discuss with the District Church Council. The District Pastor and the District Council can approve this once they have made sure that:
- The community is supportive of this Purchase;
- This Purchase is beneficial to the local community and fits with the plans the District Pastor and the Councils have for the local community;
- The Purchase is standing on a financially sound plan for the community/District.
To establish the value of a property, secure an appraisal made by a reputable local real estate office that is state certified to make an appraisal of residential or commercial real estate. This real estate office will be a different one from where the property is listed for sale.
- Staff Site Visit
After OBIAD receives the property purchase request from the District Pastor and the property is evaluated, OBIAD staff may visit the site to make a report to confirm its location, the present state, current and future use, price and the surroundings, as well as evaluating comparable properties. This report is circulated to be read by HSA’s Executive Committee and Asset Management Team.
- Executive and Asset Management Review
HSA’s Executive Committee and Asset Management Team will meet periodically to update information and review the properties proposed for purchase.
Points to be reviewed:
- All prior steps are taken.
- Discuss the reports and the various viewpoints and opinions.
- Determine if there is adequate need for this purchase and sufficient long term financial resources.
- Recommend to HSA Board if the property is a solid investment.
- Determine how and when the property is purchased and at what price.
- Property Purchase discussed with Senior Board Member
The Director of OBIAD will discuss the request for property purchase with the President of the Board. When the President sees no objections, the Asset Management Team can commence with the property purchase.
- Place Bid to Purchase, Contingencies and Negotiate price
All bids and purchasing contracts must be presented to OBIAD prior making a formal offer or ratifying any contract. Adding contingencies to the contract enables buyer to renegotiate or cancel the contract if certain criteria are not met. Contingencies could be based on the outcome of a test result or when a dollar amount exceeds what HSA is willing to pay for the repair. Examples are: contingent upon results from well testing, soil testing, foundation testing, led/asbestos testing, land survey, Technical inspection of the property, mortgage contingency etc. and approval from HSA-UWC Board.
In most States it is customary to attain a purchasing Broker from a reputable local real estate office that represents HSA and can help with property viewing and the bidding process. To ensure objectivity this Broker must be with a different real estate office from where the property is listed. The Broker we choose will be specialized in the same field as the listed property (Residential or Commercial). The property will be compared with similar listings on the MLS (Multiple Listing Services). Our final offer should not exceed the appraisal value for the property. During negotiations, OBIAD should be kept informed and work closely with the local church involved in the decision making process.
- Bid Accepted by Seller
Once our bid has been accepted, OBIAD will work to provide assistance as needed. From this time HSA is bound by contract to purchase the property for an agreed price, date and anything else agreed upon stated in the contract. If a contingency that we included in the contract is triggered, we can renegotiate the contract or decide to cancel the contract entirely.
- Final Decision to Purchase Approved by HSA-UWC Board
Once all prior steps have been completed and successful bid is accepted, approval procedures will be followed. The property purchase details describing what property is bought, from whom, at what price and the method of purchase will be presented to the Board. Since this document is a final document seeking approval for property purchase, a thorough review should be made to ensure there are no missing procedures or papers.
- Legal Department to Supervise all Documentation for Purchase
The Legal Department makes sure all documents are legal, the title is clear. The Legal Department must ensure the following documents are in order:
- Purchase agreement and contracts
- Inspection report
- Mortgage loan (if applicable)
- Title work (working together with settlement agent and any attorneys)
- Transfer of Property Title to HSAUWC HQ
On the agreed purchase date, the title is transferred to HSA-UWC and funds are paid to seller.