Selling church property requires expertise.

April 30, 2013

A “bill of sale” is not the correct instrument. A deed that describes the property to be conveyed is the correct document. The survey the neighbor ordered will contain the necessary legal description of the land….

Old ChurchReader Question: Our church desires to sell a portion of our lot to a neighbor.  The neighbor has agreed to our price, and he has ordered a survey. The portion is about 25 feet wide and about 107 feet deep. It is half of a street planned 60 years ago but never developed; the church and a neighboring property owner at that time each bought half. It is an empty lot between our two lots. No one in the church currently has any experience in selling/buying property/land, and we feel stuck. What are our next steps? What is involved from a paperwork standpoint? Do we need a real estate agent? Can we get by with just a lawyer handling the paperwork? Can we just draw up a “bill of sale”, have it notarized and be done? John P.

Monty’s Answer: Hello John, and thanks for the questions. A “bill of sale” is not the correct instrument. A deed that describes the property to be conveyed is the correct document. The survey the neighbor ordered will contain the necessary legal description of the land. The deed will be recorded with the governmental unit responsible for maintaining land records when the transfer occurs.

The first steps.

Consider engaging a knowledgeable real estate agent to perform three tasks:

1. Provide a written Brokers’ Price Opinion (BPO) that includes three comparable sales to justify their opinion of the value of the property to be conveyed.

2. Draft a purchase agreement that spells out all of the terms of the proposed sale. Insert a clause that requires the approval of the church’s attorney within 10 days of acceptance by both parties, or something to that affect.

3. Close the transaction with a closing statement that documents which party is responsible for payment of the various miscellaneous closing costs and real estate tax proration’s. This is also the meeting at which time the seller provides the deed in exchange for the money the seller agreed to pay for the land.

Ask three separate agents to perform these tasks, and the cost of these services. They will all provide a different price for their services. Some agents will eliminate themselves by declining the assignment. An agent with experience in subdividing land is important with your circumstances. There are interview questions to ask the agents on the DearMonty.com Website. These questions will help recognize the agent best suited for your situation.

Ask the right questions.

The fact that a price was established, yet “no one in the church has any experience buying or selling real estate” is a concern. Who had the original idea to sell to the neighbor? Did the neighbor approach you, or did you approach him? What is he planning to do with the property? Will the sale open up vacant land behind the church that can now be developed? What I am driving at is the potential consequences to the church based on what happens to the property in the future.

Any conversations with the buyer about their intentions may be honest and sincere, but realize that one day the church may be dealing with some other party. What uses are now permitted in the official zoning records? Is the congregation in agreement with the idea that something may be built there in the future? Have any restrictive covenants been considered about the future use of the property? A restrictive covenant could include a clause prohibiting development “that runs with the land.” Is the congregation concerned about the answers to these types of questions? The answers to these questions need to be known before agreeing to sell, but more importantly, at what price.

You did not state the capacity in which you are asking your questions. If acting as an official of the congregation, you and the other members working on this project have a responsibility to create a transaction that is in the best interest of the entire congregation. You may have already worked through the questions asked here, but the “no experience” statement suggests it may be helpful to mention them here in the event these are new questions. Transparency may be the best tactic to ensure the majority of the flock is in agreement with the decisions involved in a land sale.

I hope this information is helpful, John. Ask me additional questions and I will respond.