New Service Providers Enter the Charitable World
by Chase V. Magnuson, CCIM
President – Real Estate for Charities
Donors and charities may not be aware of new “service providers” entering the non-profit world to help solve difficult issues surrounding donations of real estate. Charities are reluctant to accept gifts of real property that is mortgaged or might have environmental risks attached and donors may not be able to achieve their philanthropic goals because of these issues. Slowly, these service providers have been entering the donation process to assist in solving these issues. Let us first address the problem of mortgaged properties. HomeSold, Inc., a wholly owned subsidiary of Fidelity National Financial, has developed a program to supply funding for “Bargain Sales” (donations with both a cash and gift component) of residential properties across the country. The program is open to any certified non-profit organization and their donors. The funds can be used to pay-off existing mortgages or provide cash to the donor. This can be accomplished in several ways, but the simplest example follows: Donor offers a $200,000 house as a donation to their favorite charity subject to an existing $80,000 mortgage. The donee/charity can’t expose themselves to the debt liability or doesn’t have discretionary cash needed to close the gift (i.e. Pay the mortgage off or assume liability). HomeSold will step in after due diligence (physical inspection) is completed and advance funds to purchase the debt portion of the asset. They will then own a percentage of the house. The donor will donate the free and clear ownership portion to the charity. A joint venture arrangement will be created so the property can be sold and funds distributed to the shared ownership partners under the terms of their agreement. The management and marketing of the house will be professionally handled so the transaction can be brought to a speedy conclusion for everyone’s benefit. Under this scenario the charity preserves the majority interest in the equity offered by their donor and does not have to forgo the opportunity for additional funding for their mission. A second program has been developed by the same company to provide fundraising opportunities. The program is available to all nonprofit organizations and their employees. The donor receives up to a 25% cash rebate every time they sell or purchase a home. They can use some or all of the cash as a donation to the charity. You can visit their web site at www.aboutcaps.com. Now let’s deal with support for environmentally impacted property donations. The Realty Restoration Gift Fund (RRGF), a non-profit, has created a new entity for corporations and individuals with environmentally impaired assets to maximize the potential of these assets by donating them to RRGF. Their charter is to relieve the owner of the environmental liability for a fixed price, to transform the impaired asset into a “clean” one, to facilitate the reintroduction of the newly-clean property into commercial and community benefits and through the donation of the proceeds of the resulting sale to leading American charities provide a new source of philanthropic funds. This approach provides numerous benefits.- Corporations and individuals can meet their corporate philanthropic goals, reduce future exposure to environmental risk, gain good will and simultaneously see positive impacts to their bottom line.
- Communities see impacted properties restored and economic revitalization opportunities increased.
- Charitable institutions, confronting ever-increasing needs and insufficient resources, find a new and substantial source of philanthropic support.