You Can Be Up There With Them
Many fundraisers hesitate to explore real estate gifts, viewing them as complex and unfamiliar. To shed light on this issue, we spoke with Chase Magnuson, a real estate gifting expert from RealEstateForCharities.org.
He agrees that the primary challenge is the overwhelming noise of “mythconceptions”—misconceptions repeated so often that they start sounding like the truth. Unfortunately, these myths prevent many nonprofits from tapping into one of the most lucrative sources of charitable giving: real estate.
The reality? These myths are just that—myths. By understanding the facts, fundraisers can unlock a major opportunity to generate substantial gifts that benefit both donors and charities alike. In this guide, Chase debunks five of the most common myths about real estate donations, replacing them with facts that will empower you to accept these gifts with confidence.
Every day you wait, another donor gives their property—to someone else. Only the top 1% of fundraisers are tapping into gifts of real estate—and it shows.
Yes, Fundraisers Are Missing Out
Real estate is the largest asset class in the world, valued at over $280 trillion globally. Yet, according to the National Association of Realtors, only 3% of all charitable giving involves real estate. The question isn’t whether nonprofits are missing out—it’s how much they are leaving on the table.
With a strategic approach and the right knowledge, fundraisers can turn real estate donations into a game-changer for their organization. Let’s start by breaking down some of the most common myths.
Myth #1: The Charity Must Hold the Donated Property for Three Years Before Selling It
Reality: A nonprofit can sell donated property immediately. There is no legal requirement to hold it for three years. However, if the charity sells the property within three years, it must file IRS Form 8282 with the Internal Revenue Service, reporting the disposition of the property.
Why This Myth Persists:
Many fundraisers confuse this rule with restrictions on other types of charitable gifts. The three-year rule applies primarily to valuing deductions, not to the charity’s ability to sell an asset.
Takeaway: Real estate gifts can be liquidated quickly, providing nonprofits with immediate funding.
Myth #2: Donated Property Can’t Have Any Debt
Reality: Many real estate gifts come with existing debt. While certain considerations exist—such as unrelated business income tax (UBIT)—debt does not automatically disqualify a property from being donated. In fact, many real estate gifts involve bargain sales, where the donor sells a portion of the property at a discount while donating the rest.
Workarounds for Fundraisers:
- If the debt is minimal, the nonprofit can accept it and pay off the balance upon sale.
- A Charitable Remainder Trust (CRT) can be used to accept property with debt while minimizing tax consequences.
Takeaway: Debt doesn’t have to be a dealbreaker. With the right strategy, properties with debt can still generate significant charitable contributions.
Myth #3: The Nonprofit Must Take Title to the Property
Reality: A nonprofit does not have to take direct title to a donated property. Instead, it can structure the transaction so that the donor transfers title directly to the buyer through a directed close. This eliminates risk and simplifies the process.
Alternative Approaches:
- Using a 509(a)(3) supporting organization or a single-member LLC to facilitate the transaction.
- Partnering with a real estate foundation that specializes in handling real estate donations for charities.
Takeaway: Nonprofits can accept real estate gifts without ever holding the property directly, reducing liability and complexity.
Myth #4: The Charity Can’t Reimburse the Donor for an Appraisal Fee
Reality: Once the donation is complete, the nonprofit can reimburse the donor for the cost of an appraisal. However, this reimbursement is considered taxable income, and the donor will receive a 1099 Form for the amount.
Why This Matters:
Many donors hesitate to give real estate due to the upfront appraisal cost. Knowing they can be reimbursed makes the process more attractive.
Takeaway: Transparency about reimbursement options can encourage more donors to consider real estate gifts.
Myth #5: The Donor Must Give 100% of Their Equity to One Charity
Reality: Donors can divide their charitable contribution among multiple nonprofits. They can allocate portions of their real estate gift to different organizations, increasing flexibility and donor engagement.
Example:
A donor with a property valued at $1 million could designate 50% of the proceeds to a university, 30% to a hospital, and 20% to an animal shelter.
Takeaway: Offering donors the option to divide their gift makes real estate donations more accessible and attractive.
Why Real Estate Donations Matter More Than Ever
With Baby Boomers controlling more than $48 trillion in wealth—much of it tied up in real estate—the potential for charitable real estate gifts is unprecedented.
Yet, many fundraisers hesitate to pursue these gifts due to myths, uncertainty, or lack of knowledge. This is a costly mistake. By embracing real estate giving, nonprofits can:
- Diversify funding sources beyond cash donations.
- Attract high-net-worth donors looking for tax-efficient giving strategies.
- Secure transformational gifts that have long-term mission impact.
In the next 20 years, over $85 trillion in equities will pass to the next generation. Of that, $35 trillion is tied up in real estate. So why aren’t more nonprofits asking for gifts of property? As the infamous bank robber Willie Sutton once said when asked why he kept robbing banks: “Because that’s where the money is.”
How to Get Started with Real Estate Gifts
If you’re ready to tap into the power of real estate donations, follow these steps:
- Educate Yourself and Your Team – Learn the basics of real estate gifting, tax implications, and best practices. The National Association of Realtors’ Guide to Real Estate Philanthropy is a great resource.
- Build a Network of Experts – Partner with real estate professionals, attorneys, and financial advisors to streamline the acceptance process.
- Establish a Real Estate Gift Acceptance Policy – Define clear guidelines for evaluating and accepting properties.
- Market the Opportunity – Many donors don’t realize they can donate real estate. Promote this option through donor communications, events, and online content.
- Seek Professional Assistance – Work with organizations specializing in real estate donations, such as the National Real Estate Giving Alliance, Realty Gift Fund, or Giving Property.
Need Expert Guidance?
Contact Chase Magnuson—he can help you navigate the entire process with ease.
The Bottom Line: Seize the Opportunity
The numbers don’t lie—real estate giving is a massively underutilized opportunity. Will you continue doing the same thing, hoping for different results? Or will you embrace this untapped revenue source and elevate your nonprofit’s fundraising strategy?
Real estate gifts aren’t just about raising money—they’re about securing your nonprofit’s future. Success requires knowledge, strategy, and the willingness to step outside your comfort zone.
Don’t be the fundraiser who overlooks a multi-trillion-dollar opportunity. Be the one who capitalizes on it.
