Buying Land for Your House of Worship – A Primer.
When buying land, the first thing is to ask the basic question. “Where do we need to be geographically?” If you were to say that you need to be within a five mile square of your current neighborhood or church – that is a good starting point.
The starting point is to identify the community or region where you want to grow your church. This might mean you focus on an area that is presumed to be un-churched, or perhaps it is where the majority of your current members live. Maybe the focus is to be located near a major highway so that you can attract membership from across a large area. Growing a new church means determining where to plant the seed. Once you have a geographic area determined, call your local real estate professional in Maryland, Delaware or the District of Columbia that’s Stephen Ferrandi 410-925-4566 or Josh Halbedel 443-574-1407 both religious property brokers with KLNB Commercial Real Estate. If you’re planning to build outside our market area and don’t know someone who regularly works with churches – you can find professional in your area on two of our websites ChurchConstruction.com and PraiseBuildings.com.
Running the Numbers, What Your Lender will Expect.
Though you may have purchased your current home with little or no money down don’t expect this to be the situation when it comes time to purchase land. Borrowing money for land acquisition typically requires that the buyer post a minimum of 25%- 40% down and the lender will loan the difference. Why do lenders require such a large deposit on land? Unless you have land located across the street from the Walt Disney World, it might take some time to sell the land if the lender was forced to foreclose on the property. The lender wants to give itself more surety that its money is being invested well and that you have enough “skin in the game” to do everything necessary to pay the loan back according to the agreed upon terms. . By forcing you- the buyer – to put more equity up as collateral, they gain that added protection. Additionally, foreclosing on a congregation always brings bad publicity and many lenders would rather not make a loan to a church or house of worship than take the chance that someday they might have to deal with the bad press of a church foreclosure.
Searching for land
After identifying the general location where the church should be built and raised a sizable deposit, you’re now ready to begin the search. When searching for land – don’t limit yourself only to properties actually listed for sale. Identify all of the properties that could work because of their size and location regardless of whether they are on the market. Remember, the earth is 72% water and the rest of it is for sale. Once a list of properties is identified the land owner is contacted – sometimes in writing, sometimes in person. With my real estate practice I have purchased on behalf of my clients more land that wasn’t listed with a real estate brokerage than was for houses of worship wanting to build. Listen, the worse the landowner can say is no. If you are prepared to offer them market price, they probably will listen to you, though they may not sell. Have an idea of what a realistic value is for land in that area. Unless the landowner is already a member of your congregation, don’t expect a sweetheart deal just because you’re planning to build a house of God.
When representing the church – one can call the landowner and explain that a local congregation is interested in purchasing their land, either all of it or enough acreage to construct the church.
Naturally, if they have any interest at all they will ask what the church is willing to pay. Here a little give and take normally occurs until a price is agreed upon. In determining what a House of Worship should pay for the property, it is prudent to check the following. Zoning – what is allowed to be built under government regulations.
What is land with the same zoning in the same general area selling for per acre or per square foot? What is being built on the land – retail centers, houses, industrial, or is just being used for farming.
Depending upon market conditions, farm land might sell for $500 to $50,000 per acre. Land zoned for development with public utilities in place might sell for more than $500,000 per acre. Remember the axiom; Location, Location, Location.
Once a price is agreed upon, the property is placed under contract that allows for an appropriate feasibility study period. Just because one thinks the property will work for the church site – this is no reason to buy it. One MUST complete a basic feasibility study.
In the Letter of Intent to Purchase and/or the Purchase Contract it is absolutely imperative that the purchaser has the appropriate time to complete a full feasibility study (typically, 60 to 180 days) prior to releasing any non-refundable money to the seller. You can agree to put the deposit in escrow with an attorney or title company if necessary. It is important that the contract contains a clause which states that the potential purchaser is not obligated to purchase the property if the results from the feasibility period are not acceptable.
During the study period it is important to lean as much about the property as possible. Though the seller may argue with you, 90 or 180 days is not a long time when it comes to conducting a feasibility study. During the study period it is important to learn if the property can support the church that is planned. Many congregations have purchased land without knowing the size and square footage of the building that will someday be built, only to find years later when it is time to build that the property is too small for the building intended or contains substantially un-buildable ground. If you are building in the mid-Atlantic, especially Maryland, Delaware or the District of Columbia Trinity Property Management offers a one stop shop feasibility study package for houses of worship. They can be reached at 410-925-6848.
What must be completed during the feasibility period?
- Phase One Environmental Site Assessment
- Boundary Survey
- Title Report
- Wetland delineation Study
- Forest Stand delineation
- Perk Test on the property or verification that the property will be able to access public utilities.
- Concept plan showing your church will fit on the property
First complete a Phase One Environmental Site Assessment. This will tell about environmental concerns that might be on or near the property. Looking at a beautiful wood or farmer’s field doesn’t tell one much about it. A phase one environmental site assessment reviews and documents the last 60 years of the property’s history. What was the property used for in the past? Was there any possibility of environmental contamination? If so, what kind? During the Phase One, an environmental scientist will walk the property looking for signs of possible contamination. Additionally, the environmental scientist will review the property’s history – checking old aerial photographs compiled by local governments that should what various properties were used for during the last sixty years. Other records that will be reviewed are reports of fines or court action against that property owner, or any surrounding property owners where contamination could have migrated to the subject property. If additional investigation is warranted the environmental scientist may recommend that a Phase Two survey be completed. A phase two is where the suspect property is actually tested for contamination.
In additional to a Phase One, a wetland Delineation study will need to be completed. This study will tell how much land is considered wetlands. Remember, under most circumstances wetlands cannot be destroyed, filled in or build on wetlands. From the wetland study, the consultant will create a wetland delineation map showing that portion of the property that can be developed from that portion that contains wetlands can needs to be preserved as undisturbed ground. Ground does not have to be wet to be classified as wetlands.
According to the Army Corps of Engineers, wetlands are “Wetlands are areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs, and similar areas.”
In more common language, wetlands are areas where the frequent and prolonged presence of water at or near the soil surface drives the natural system meaning the kind of soils that form, the plants that grow, and the fish and/or wildlife communities that use the habitat. Swamps, marshes, and bogs are well-recognized types of wetlands. However, many important specific wetland types have drier or more variable water systems than those familiar to the general public. Some examples of these are vernal pools (pools that form in the spring rains but are dry at other times of the year), playas (areas at the bottom of un-drained desert basins that are sometimes covered with water), and prairie potholes.
It is also important that a Title Search on the property be completed. The seller must be able to deliver “Good and Merchantable Title”. If there is a problem with the title on the property, the seller must be able to correct the title issue prior to settlement. If the seller can’t deliver clear title, the property will not be able to transfer ownership. A Boundary Survey confirms that the buyer is purchasing the amount of acreage being advertised.
Once the property can be sold with clear title and that is passes environmental contamination test, the next step is to have a professional land planner or civil engineer layout the site for the project. Again, these professionals can be found on PraiseBuildings.com. During this land planning process, the land planner needs to place the proposed church on the site. Does a building the size you are expecting to build, fit on the site? Is there ample parking that meets local requirements for parking capacity? In the mid-Atlantic, the rule of thumb is that one car equals three people and that on average 100 cars can fit on a paved acre parking lot. Using this rule, if a church had 600 active members, the church would need 2 acres for ground just for parking. This would be in addition to the church and other buildings on the site, non-buildable, areas, such as wetlands, steep slopes, streams, and storm water management areas.
A word about storm water management, most jurisdictions required that new developments – such as churches – capture all of the water from impervious surfaces during a rain or snow event and contain it on site, prior to releasing it into a stream after the storm. Impervious surfaces are roofs, sidewalks and paved parking lots. Churches have lot of impervious surfaces. This means that churches require a large area for storm water retention. The two basic ways of containing storm water are in large specially designed pits called storm water management retention ponds, and underground retention. Most developments projects, church included, use retention ponds because of the extreme cost of building storm water management under the parking lot. Nonetheless, it’s worth noting that if the site is smaller, storm water might be able to contain under the parking lot.
The last point is to make sure that the subject property can be connected to public utilities or that the property can support a septic system and have access to well water. Early in the feasibility timeframe, it is important to contact a firm that percs property. Depending on the soil conditions, the perc test may need to be completed only during certain months of the year.
All of these various studies will cost between five to twenty thousand dollars or more. This is money that is typically paid by the buyer and not refundable by the seller if the property is not sold. This money is well spent, even if the church decides not to buy the property. It is still cheaper to spend money on a feasibility period, than buying the property without studying it, only to learn that it doesn’t work.
TIME LINE: From Land Acquisition to issuance of building permits
Here is a basic time line with the various issues that should be addressed during each milestone from site acquisition until construction permits are issued.
- Identify potential church site: 3 – 6 months
- Don’t rely solely on properties for sale in multiple lists.
- Identify properties in the geographic area where the House of Worship should be located. Locate the landowner via land or tax records and make an offer.
- Study period prior to settlement – 60-180 days
- Secure financing: 45 days
- Settlement after study period – 30 days
- Interview architects or design/build construction firms -60 days
Once property has been acquired, meet with various architects and/or design/build contractors who specialize in designing churches or other Houses of Worship. A complete list of firms is found on both www.ChurchConstruction.comand www.PraiseBuildings.com. During the interview process, it is very important to discuss not only what is to be built, but also an honest discussion of cost and budget constraints.
- Architectural Design & Specifications – 60-270 days
This is a give and take process in which the design professional will create several versions of the blueprints that will continue to be refined during various conversations with the building committee. This process normally starts with a wish list in which the designer learns all of the items that are important to the client and begins showing these “wish list” items on a draft drawing. Building plans are refined over several re-iterations.
- Bid Out Work – Once a scope of work has been developed, the architect or design build contractor will put the work out to bid to the various contractors, sub-contractors, and specialty vendors.
- Building Permits – 60 days to over three years
In most jurisdictions, the issuance of building permits occurs after the completion of building plans. Depending on the jurisdiction, traffic impact studies, variances, community input meetings or other special permissions may be required before building permits will be issued.
So purchasing land to develop into your new church or house of worship is an expensive and time consuming project but with the right team on the committee and by hiring experienced professionals to guide you through the development process the purchase of land could be a pivotal part of your congregation’s history.