The donor will receive a charitable deduction. The university will sell the house to generate cash to create a charitable gift annuity.
When the donor dies, the university will get whatever is left in the trust established to support the annuity payments - generally 50 percent of the original amount of the gift, Magnuson said.
While the university owns the house, it will be responsible for paying property taxes.
Magnuson said the donor will not continue living at the property under this donation arrangement with the university.
"The donor gets recognition during his life, a tax deduction, lifetime income, and out of property-management responsibilities," he said.
How might today's property values in Philadelphia affect this gift?
Economist Kevin Gillen, vice president of Econsult Corp., said that as of the first quarter home prices had declined 15.8 percent in Philadelphia as a whole from the third quarter of 2007, but just 13 percent in the zip codes that include Center City and Fairmount.
Because the market for real estate is not what it was four years ago, wouldn't that take a big bite out of the size of the gift to the university - even just 13 percent?
"The appraisal does impact the charitable deduction," Magnuson said, "but donors who have owned property for a long period of time have seen tremendous appreciation, even if current fair-market values are off."
The donor of the property purchased it in 1964, just as the Society Hill renewal effort was building steam - in other words, for practically nothing compared to what the townhouse is worth today.
What about the condition of the property? Neighbors said it had been vacant for a long time. And then, of course, there was the contractor who piqued my friend's interest.
In some cases, the university may be required to spend funds on repairs, but, in this donation arrangement, it won't be necessary, Magnuson said.
The university "will sell and close the gift simultaneously," he added.
Last year, according to Magnuson, donors in the United States gave more than $300 billion to charity. Although real estate accounts for 40 percent of the country's wealth, it accounted for just 3 percent of that total, he said.
There are various kinds of real estate gift structures, Magnuson said, in addition to the charitable gift annuity:
The outright gift of a debt-free property.
A bargain sale, in which the donor receives cash or mortgage relief. For example: A house with a fair-market value of $500,000 has a $200,000 mortgage. The donors receive a deduction of the difference.
A charitable remainder trust. The property is placed in a trust, then sold to establish an asset on which a fixed percentage is paid.
A retained life estate, which allows a donor to transfer title to the property to a charity, but gets to live out his or her life there.
Until recently, just a small percentage of charities accepted real estate as donations, Magnuson said, adding:
"If more people knew about the gifting options, I'm sure charities all around Philadelphia would benefit."
"On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472, firstname.lastname@example.org or Twitter: @alheavens.