Appraising Residential Subdivision Sites

Residential subdivision sites are either vacant with no improvements in place, a state that is referred to as "paper lots," in a state of partial improvement (often with just a roadway easement in place that is often gravel surfaced or paved) or it is in a "finished" state with all Improvements.  Lots that are "finished" usually have curbs, gutters, sidewalks, paved roadway access, utility services stubbed to each lot and street lights.  Appraiser must compare subdivision site sales with similar improvements and adjust for differences.

Raw land or vacant land lacks even the basic engineering and approvals that have been acquired by properties that reach a "paper lot" state.  Some properties with final development maps, and even some parcels with partial improvements, end up being reasoned and used for other purposes.  It's important for an appraiser to consider all legal, physically possible and financially feasible uses even though someone has started the development process.

A number of subdivision sites that I have appraised had some of the lots already developed, so it was easier for me as the appraiser to tell what type of improvement was likely to be constructed on them.  Appraising those sites was more about absorption since it was likely that they would be developed in the future by the owner / builder with a similar product to that already started in the subdivision. 

Zoning often determines what will be constructed in any given subdivision since it usually dictates the maximum unit density or the number of dwelling units per acre.  Local governments in conjunction with neighbors and owners usually establish via planning what use is reasonable for a site.  Site development potential, as we all know, also has a lot to do with its location.

Master planned communities are large-scale plans that often offer developers flexibility within the planned area.  They are often allowed to shift the intensity of development around within the community and they decide where commercial development will occur.

Valuing the lots in a subdivision is straightforward via the sales approach, but appraisers must consider the supply and demand for lots in the market area.  If you have 106 lots valued based on current comparable sales but only 10 per year will be absorbed, it's time to create a spreadsheet that considers the price to the lots in the future, the holding costs, expenses of sale and the time value of money using a discounted cash flow (DCF) analysis.

Even though its not compelling, I usually consider the current value of each of a subdivisions lots via allocation.  It's not difficult to complete this analysis, and I generally want as many checks on my conclusions as I can get. 

When the data is available it's only common sense for an appraiser to compare the sale of one group of subdivision lots, with a similar location and amenities, to the subject lots.  This direct comparison works well when there are strong similarities to the subject, but not so well when their are major differences.
 
For more residential or commercial appraisal information contact Glenn Rigdon, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

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