How to Donate Real Estate as a Gift
The Steps to a Donation
Initial inquiries often originate from a nonprofit or advisor inquiring for a donor or client who may own a property suitable for a charitable gift. We do not expect any of those involved in the early discussions to be experts in real estate giving or to be able to perform an initial property assessment. We may see value in a deal that others don’t.
In fact, we encourage our nonprofits and advisors to get donors to the point where everyone simply “wants to learn more”, which is perfect time for the exploratory call to Realty Gift Fund.
So, the first call may be with the nonprofit or advisor acting on a donor’s request to test if a property is likely acceptable. We appreciate and encourage these calls.
If the proposed property appears to fit, a follow-up discussion that includes the donor is recommended so that all parties may review the donor’s goals, learn more about the property, and better discuss a process that suits the donor and the property.
With the basic information at hand, Realty Gift Fund will create an initial Net Gift Estimate to summarize the likely outcome of the gift, using values assumed in the preliminary discussions. At this step, RGF will also deliver a draft Real Estate Donation Agreement for the parties’ review.
RGF does not charge a fee for its work but retains a small portion of the net proceeds created after RGF has accepted and sold the property. RGF then grants the balance of charitable funds to the other nonprofit(s) recommended by the donor and approved by RGF. The amount retained, the amount(s) granted, and the nonprofits benefiting from the grants are incorporated as terms of the written Real Estate Donation Agreement, signed by RGF and the donor.
Once the agreement is signed, Realty Gift Fund will commence its “inspection period” (typically 20-30 days), keeping the donor, advisor and nonprofit informed of findings. At this stage, RGF will engage a local real estate broker for expert on-site evaluation and for planning a marketing strategy unique to the circumstances.
During the inspection period, the donor may order an appraisal of the property. However, RGF will assist the donor with the timing of the appraisal which may vary depending on circumstances.
At the conclusion of the inspection period and formal acceptance by RGF, the property deed will transfer from donor to RGF, the gift will be complete, and RGF will provide donor all documentation (including IRS Form 8283) for donor’s tax file. All closing costs and prorations are funded by RGF.
After accepting the gift, RGF will undertake repairs, remediation, and marketing the property for sale, all as deemed necessary by RGF and its broker. RGF will fund these and all holding costs during its ownership period.
The sale of the property, now owned by RGF, may conclude shortly after the donation or may take an additional unknown period. In any event, RGF pays all closing costs and prorations for the sale.
During the entire gift process, the appraisal is most often the donor’s only cost.
Upon the sale of the property, all RGF’s investment in the property will be reimbursed, resulting in net proceeds to be distributed among all the nonprofit(s) benefiting from these “net charitable funds”.
- RGF (one of the benefitting nonprofits) retains $20,000 (minimum) to $30,000 (typically) as its share of the net charitable funds.
- RGF grants the balance (typically 90% to 99%) to the other nonprofits identified in the Real Estate Donation Agreement by wire usually within 24 hours of receiving the net gift funds from the title company handling the sale.
- RGF provides the donor and donor’s advisor a final Net Gift Estimate reconciling the initial assumptions to actual values.
Realty Gift Fund accepts Outright Donations, Bargain Sales, Partial Interests, and Bequests. Donations to RGF can be used to fund one or multiple other nonprofits, and/or Donor Advised Funds, in any combination.