Special use appraisals determine property value when a property’s use is restricted by zoning, nonprofit operations, or legal limitations, making accurate valuation essential. California Business and Professions Code §11302 defines an appraisal as a written statement, independently and impartially prepared, setting forth an opinion of a property’s market value — and specifically excludes an opinion given by a real estate licensee, engineer, or land surveyor in the ordinary course of business from being called an appraisal. The standards used within the appraisal profession are set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), developed by the Appraisal Standards Board of The Appraisal Foundation — the organization Congress authorized in 1989 to set appraiser standards and qualifications nationwide.
Special use appraisals are essential for properties that cannot be valued through traditional market methods, especially religious and nonprofit facilities.
Purpose of a Special Use Appraisal
An appraisal may be necessary for any number of reasons. The most obvious examples are transferring title, determining a buying or selling price, or obtaining a loan. Other, less common reasons could be a 1031 exchange, probate, determining gift or inheritance taxes, donation value, or eminent domain proceedings.
Depending on the purpose of the appraisal, different approaches to arriving at an opinion of value may be necessary. Many nonprofit and religious organizations rely on special use appraisals to establish accurate values for donations, estate planning, and tax reporting.
Types of Special Use Appraisals
The Income Approach shows the relationship a property has to the income it can generate. This approach has little place in valuing a special use property like a church, since a church isn’t built to earn a profit — the resulting return on investment, if any, isn’t measured in dollars by that kind of owner. Few churches are rented for a tenant’s exclusive possession, and even when they are, rarely at anything resembling market rent for comparable commercial space.
The Market Approach compares recent sale values of similar properties, adjusting for variations in land size, zoning, building age, condition, and construction. This approach applies to religious properties in theory, but in practice, only a limited number of open-market church sales exist, and those sales often make poor comparables — the reasoning and motivation behind a religious property sale can be hard to untangle from an ordinary commercial transaction, often requiring large value adjustments. This is exactly why special use appraisals are often preferred when comparable sales data is limited or unreliable.
The Cost Approach estimates what the land and building would cost to construct today, using current construction technology, materials, and techniques. This requires analyzing construction type, materials, amenities, and quality for the improvements, then deducting accrued depreciation based on the property’s age, condition, and construction type, before adding back the value of the land itself.
Obtaining the Correct Opinion of Value
“Special use property” is a generic zoning term, often used as a synonym for “special purpose property.” California Code of Civil Procedure §1235.155 defines “nonprofit, special use property” as property “operated for a special nonprofit, tax-exempt use such as a school, church, cemetery, hospital, or similar property.”
All real property is unique — no two parcels are alike. That uniqueness is what makes two otherwise-similar properties differ in value. Religious-use properties also have a limited market, since there are relatively few potential buyers. To be precise, “special use” specifically refers to an exception the local zoning authority permits to the otherwise-allowed use on a parcel — not to be confused with a Conditional Use. Understanding when special use appraisals are required helps property owners avoid inaccurate valuations and improper tax assessments.
Depending on the circumstances, a Certified General Appraiser is often necessary to value a special purpose property. That’s the highest certification available in the field, permitting the holder to value all real estate regardless of transaction value or complexity. A Residential or Certified Residential appraiser shouldn’t be used instead — those credentials are limited to 1–4 family properties (with some value and complexity limitations) and non-residential property up to a $250,000 transaction value.
Special Use Appraisals in Litigation
Litigation involving the value of special purpose property most often arises in eminent domain or inverse condemnation proceedings. Even when a formal court proceeding doesn’t ultimately result, a litigation appraisal from a Certified General Appraiser — although costly — is usually a must. In either instance, the parties will at some point trade appraisals to compare values. No two appraisers arrive at the exact same number, but when both use the same valuation approach, the numbers should land in the same general range. In eminent domain and inverse condemnation cases, special use appraisals are often the only dependable method for determining just compensation.
Special Use Appraisal Cost (on Average)
- Residential (single family): $300–$500
- Residential (up to four units): $700–$1,000
- Commercial: $2,500–$5,000
- Special Use: $8,000–$10,000
- Litigation: $20,000–$40,000
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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
