Property Valuation Division, Directive

Directive Number:92-013
Tax Type:Property Tax
Brief Description:Appraisal of Subdivision Lots
Effective Date:11/30/1992


TO: County Appraisers

SUBJECT: Appraisal of Subdivision Lots

This directive is adopted pursuant to the provisions of L. 1992, ch. 249, 1, and shall be in force and effect from and after the Director's approval date.

The county appraiser shall follow the procedures set forth herein if, in the appraisal of subdivision lots, the county appraiser elects to use the developer's discount methodology.

Although K.S.A. 79-405 requires platted lots in a subdivision to be identified and taxed individually, the appraisal should be based upon the entire tract of land. When the appraisal of the whole tract is complete, the market value shall be allocated among the developer's individual lots. This requires the county appraiser to distinguish between the gross sellout (aggregate of individual retail prices) and the market value (wholesale value of the development as one unit).

County appraisers shall obtain pertinent income and expense data from developers and prepare an estimate of value based on the present worth of the projected income stream.

The appraiser shall use a discounted cash flow analysis that itemizes the entire income and expense flow on a year-by-year basis during the absorption period. In selecting the discount rate, the appraiser is to consider the desirability of the project, the risk involved and the competitive rate of return required to attract capital to the project. This methodology shall be subject to an annual review of all pertinent data. Factors such as the absorption rate, discount rate, lot prices and operating

expenses shall be reexamined annually before the discounted cash flow analysis is recalculated.

Although the sale data of individual lots shall be very useful for arriving at individual lot values it shall not be used in the official state assessment/sales ratio study. To properly flag this sale data in CAMA for exclusion, a source code of 7 is to be entered when the transfer is processed.

Actual use of the land should be determined. If the property is being used for agricultural purposes, the appropriate land use value should be applied to the land.

(Date) David C. Cunningham
Director of Property Valuation

Date Composed: 10/02/1997 Date Modified: 10/11/2001