4.4.5.1. Reasonable Probability of Development.Under federal law, the development method cannot be used unless the property was “‘needed or likely to be needed in the reasonably near future’ for residential subdivision.”638 And showing “that a few new homes had been built in the area around the time” of valuation is insufficient: There must be “evidence ‘of…current demand or potential for subdivisions in the neighborhood[.]’”639 To credibly establish demand for such lots, “there must be some evidence that others have developed and sold such lots, so as to establish a trend, at least, toward that type of development of [similar] property.”640 

Use of the development method requires evidence that on the date of value, there was a reasonable probability that the property could be developed as a residential subdivision and that its lots would be sold within a reasonable time.641 It cannot be used “if the subdivision is improbable or unrealistic or merely theoretical or speculative or capable of realization only in the remote future . . . .”642 

As practical guidance, consider these district court instructions in one case regarding the evidence necessary to support the use of the development method: 

[I]f you conclude that this property by map was subdivided into individual lots; that the property was adaptable for residential subdivision purposes; that physical changes were made on the land, such as the digging of a well with a sufficient water supply for development purposes; constructing a lake; road grading and other physical changes in the condition of the land; that some lot sales had actually taken place; that there was a reasonable probability that this property could be developed as a residential subdivision; that the anticipated expenses of development would be as [estimated]; that there would be a market for the sale of these lots and that these lots would be sold within a reasonable time…then you may accept the opinion based upon [this method].643