It sure looks like it. But why? Many fundraisers hesitate to explore what they perceive as unfamiliar territory. To shed light on this issue, we spoke with real estate gifting expert Chase Magnuson (RealEstateForCharities.org).
He agrees that the main 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. And 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.
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.
Mythconception #1: The Charity Must Hold the Donated Property for Three Years Before Selling It
Fact: 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 to benefit the nonprofit, making them a powerful fundraising tool.
Mythconception #2: Donated Property Can’t Have Any Debt
Fact: Many real estate gifts come with existing debt. While there are considerations, such as unrelated business income tax (UBIT), debt does not automatically disqualify a property from being donated. In cases of bargain sales—where the donor sells a portion of the property at a discount—debt is common.
Workarounds for Fundraisers:
- If the debt is minimal, the nonprofit may choose to accept it and pay off the remaining balance upon sale.
- In some cases, 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 approach, properties with debt can still be successfully donated.
Mythconception #3: The Nonprofit Must Take Title to the Property
Fact: 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 method simplifies the process and eliminates risks associated with holding the property.
Alternative Approaches:
- Using a 509(a)(3) supporting organization or a single-member LLC to manage the transaction.
- Partnering with a real estate foundation that specializes in handling real estate donations for charities.
Takeaway: Nonprofits can facilitate real estate gifts without ever holding the property directly, reducing liability and complexity.
Mythconception #4: The Charity Can’t Reimburse the Donor for an Appraisal Fee
Fact: Once the donation is complete, the nonprofit can reimburse the donor for the cost of an appraisal. However, the 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 because of the upfront appraisal cost. Knowing they can be reimbursed makes the process more attractive.
Takeaway: Transparency about reimbursement options can help nonprofits secure more real estate donations.
Mythconception #5: The Donor Must Give 100% of Their Equity to One Charity
Fact: 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 can make real estate donations more appealing and accessible.
Why Real Estate Donations Matter Now 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:
- Expand funding sources beyond cash donations.
- Attract high-net-worth donors looking for tax-efficient giving strategies.
- Create transformational gifts that significantly impact their mission.
Steps to Get Started with Real Estate Gifts
If you’re ready to tap into the power of real estate donations, here’s how to begin:
- Educate Yourself and Your Team – Learn the basics of real estate gifting, tax implications, and best practices. Read the National Association of Realtors’ Guide to Real Estate Philanthropy.
- Build a Partnership Network – Collaborate with real estate professionals, attorneys, and financial advisors to streamline gift acceptance.
- Develop a Real Estate Gift Acceptance Policy – Establish clear guidelines to determine which properties your organization will accept.
- Market the Opportunity – Many donors don’t know they can give real estate. Promote this option through your website, donor newsletters, and events.
- Seek Professional Assistance – Work with organizations that specialize in real estate donations, such as National Real Estate Giving Alliance, Realty Gift Fund or Giving Property.
- Email Chase Magnuson. He can help you every step of teh way.
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 take your fundraising to the next level?
Real estate gifts aren’t just about fundraising—they’re about securing your nonprofit’s future. The key to success is knowledge, strategy, and the willingness to step outside your comfort zone.
Don’t be the fundraiser who ignores a multi-trillion-dollar opportunity. Be the one who unlocks its potential.
