By Dennis Bidwell
December, 2014
Q: What’s the best way to approach a donor about a possible real estate donation?
A: First, you’re on the right track by thinking in terms of approaching potential donors, rather than waiting for them to contact you about their real estate. In fact, the most transformative real estate gifts I’m seeing these days are those that result from conversations initiated by a development officer. What I believe is most successful is this: 1) Do your research (internally or with assistance from outside contractors) to identify folks who fit the profile of a real estate donor. 2) Decide who is best positioned in your institution to visit with this prospect. 3) Be clear on what types of real estate gifts your organization will and will not accept. (Hopefully your gift acceptance policies reflect best practices in this area.) 4) Rehearse with a colleague the way you will handle the conversation. 5) Be confident that if you’ve done your homework well (i.e. if the prospect really does fit the profile of a real estate donor) your prospect will likely welcome a conversation about a situation that is very much on their minds these days. 5) Recognize that you don’t need to be an expert on the technical aspects of real estate gifts, and trust that that expertise (hopefully) resides back in your shop or with outside assistance you can tap. 6) Enjoy your conversation, and keep your ears tuned to real estate situations that might lend themselves to gift scenarios.
Q: How worried should we be about environmental problems in gifted real estate?
A: It’s my experience that very often the risk of environmental contamination on a property is overstated, often reflecting a story involving acceptance of a property 30 years ago with a gas tank, or with spilled chemicals, etc. Often this story, apocryphal or not, has become legend and been used to cut off discussions of real estate gifts. The reality is that tried-and-true gift screening and due diligence approaches commonly in use today would quickly identify the existence of such an environmental problem and would lead to dismissal of the gift possibility very early in the process. Increasingly, non-profits are agreeing to cover the cost of a Phase I environmental assessment as a cost of doing business. Also, sometimes it’s worth looking at a property that might require some investment in clean-up. Would it make sense to turn down a $1,000,000 gift because of a $10,000 cleanup?
Q: How do I convince my bosses to open the door to real estate gifts at our institution?
A: My September, 2014 newsletter was devoted entirely to this subject.
Q: Does an organization have to be a particular size before it considers real estate gifts?
A: I am seeing organizations with 2 and 3 person development shops ramp up their capacity to handle real estate gifts. And I am seeing smaller development operations seek real estate gifts, knowing they can turn to outside expertise (community foundation, sometimes an area university, a real estate gift consultant) to help them handle the gift. Some community foundations look for opportunities to partner with smaller non-profits in structuring and managing planned gifts involving real estate.
Q: What should be our approach when we know a donor intends to leave us property through their will?
A: If the property they have in mind is a residential or agricultural property, you should arrange to visit them next week to explore the suitability for them of a current gift subject to a retained life estate. Most property owners, even those with excellent legal and tax counsel, aren’t aware that they could achieve essentially the same results as a gift by bequest by making the gift now, retaining a life estate. The difference is that in the case of retained life estate gift they are entitled to a substantial income tax deduction, and they would have the satisfaction (and recognition) of making the gift during their lifetime.