Current through Register Vol. 35, No. 18, September 24, 2024
A.
INCOME
METHOD OF VALUATION - IMPLEMENTATION:
(1) The income method of valuation is a
method used to value property by capitalizing its income when the market value
method cannot be used due to lack of data on sales of comparable properties and
no special method specified in Sections
7-36-20
through
7-36-33
NMSA 1978 is applicable. The value of the property under the income method of
valuation is determined by dividing the annual income by the applicable
capitalization rate.
(2) Income is
predicated on estimated future income which could be realized from the legally
permitted highest and best use or uses of the property.
(3) Where sufficient evidence of the rental
value of the property being valued is available, the income is based upon the
fair rent which can be imputed to the property being valued based upon rent
actually received for the property by the owner and upon typical rentals
received in the area for similar property in similar use, provided that use is
the legally permitted highest and best use. When the property being valued is
actually encumbered by a lease, the cash rent or its equivalent considered in
determining the fair rent of the property is the amount for which the property
would be expected to rent at its legally permitted highest and best use were
the rental payment to be renegotiated in the light of conditions as they exist
at the time the property is being valued.
(4) Where sufficient evidence as to rental
value of the property being valued is not available, the income used is based
upon the fair rent which the property being valued reasonably can be expected
to yield under prudent management. The imputed fair rent is developed from
market information which reflects the probable rental value of the property
being valued in the open market at its legally permitted highest and best
use.
(5) "Income" as that term is
used in Section 3.6.5.22 NMAC is net income or the difference between annual
revenue or receipts, actual or imputed, from rental of the property and the
annual expenses relating to the property.
(6) "Expenses", as that term is used in
Section 3.6.5.22 NMAC, is the outlay or average annual allocation of money or
money's worth that can fairly be charged against the revenue or receipts from
the property. Expenses are limited to those which are ordinary and necessary in
the production of the revenue and receipts from the property and do not include
debt retirement, interest on funds invested in the property or income
taxes.
B.
COST
METHODS OF VALUATION - IMPLEMENTATION: Generally, the cost methods of
valuation are methods for valuing improvements or personal property by
determining the costs of reproduction or replacement of property with property
which is as good as, but no better than, the improvements or personal property
being valued. The reproduction or replacement may be duplicate or equally good
substitute property. If the improvements or personal property being valued are
not in a new condition, the appropriately depreciated value of a new
reproduction or replacement, as circumstances justify, is used to determine the
value of the used items. In the case of newly constructed improvements,
original cost, in an arm's length transaction, is the closest approximation of
value. Trending may be used to implement the cost method of
valuation.
C.
IMPLEMENTATION
BY MEANS OF SCHEDULES AND MANUALS: Implementation of the valuation
methods authorized in Subsection B of Section
7-36-15
NMSA 1978 may be by means of schedules and manuals approved by the
division.
D.
IMPROVEMENTS AND
RIGHTS NOT VALUED SEPARATELY FROM THE LAND THEY SERVE: Subsection C of
Section
7-36-15
NMSA 1978 requires that the improvements and rights listed therein be
considered as appurtenances to all land they serve, regardless of whether or
not the improvements and rights are owned by the owner or owners of all the
land they serve. The value of those rights and improvements are included in the
determination of the value of the land served and are not valued
separately.
E.
PIPELINES USED
SOLELY FOR IRRIGATION OR STOCK-WATERING PURPOSES: Pipelines used
primarily for irrigation or stock-watering purposes shall not be valued
separately from the land they serve, shall be considered as appurtenances to
the land they serve and their value shall be included in the determination of
value of the land they serve.
F.
SUBDIVISIONS - IMPLEMENTATION OF VALUATION METHODS:
(1) The term "subdivision" as used in Section
3.6.5.22 NMAC means "subdivision" as defined by Section
47-6-2
NMSA 1978, except that, for lands within a municipality or the extraterritorial
zone of a municipality, the term means "subdivision" as defined in Section
3-20-1 NMSA
1978.
(2) Lots or tracts within a
subdivision are valued for property taxation purposes on the basis of sales or
other dispositions of comparable unsubdivided property until sales in the
subdivision as of January 1 of the tax year have exceeded the percentage
specified for the purpose for the class or type of subdivision in applicable
schedules, manuals or instructions of the division. Sales of comparable
unsubdivided property are adjusted to reflect expenditures made by the
developer, such as the addition of roads, utilities and other subdivision
improvements and related engineering and similar costs. If the roads within a
subdivision have not been dedicated to a municipality or a county, the roads
are not valued separately from the land they serve but are included in the
value of the land they serve.
(3)
After sales within a subdivision have exceeded the specified percentage, the
lots or tracts within the subdivision are valued on the basis of sales of
comparable lots or tracts in subdivisions or, if that method cannot be used due
to the lack of comparable sales data, the income or cost method. Lots in a
subdivision which have been sold or disposed of by a developer, but which are
owned or held on January 1 of the tax year by the developer because of breach
by the consumer of the agreement transferring the developer's interest, shall
be considered as lots in which the developer has sold or disposed of his
interest for purposes of determining the percentage of sales.
(4) In implementing the market value method
of valuation for subdivisions, reference shall be made to disclosure statements
filed with the county clerk pursuant to Section
47-6-17
NMSA 1978 of the New Mexico Subdivision Act. The "proposed range of selling or
leasing prices, including financing terms" set forth in that statement,
however, are not used as a substitute for sales of comparable property in
determining value under the market value method of valuation.
G.
MARKET VALUE METHOD OF
VALUATION - IMPLEMENTATION:
(1) The
market value method of valuation is a process of analyzing sales of similar
recently sold properties in order to derive an indication of the most probable
sales price of the property being appraised. The reliability of this technique
is dependent upon:
(a) the availability of
comparable sales data;
(b) the
verification of the sales date;
(c)
the degree of comparability or extent of adjustment necessary for differences
in time of sale and time of appraisal; and
(d) the absence of nontypical conditions
affecting the sales price.
(2) "Market value" means a price which a
willing and informed buyer, not obligated to buy, would pay a willing and
informed seller, not obligated to sell, taking into consideration all uses
including the highest and best use to which the property is adapted and might
reasonably be applied.
(3)
Comparable property is property similar to the property being valued and which
recently has been sold or is currently being offered for sale in the same or
similar areas. Similarity to the property being valued is determined by
examining the characteristics of the properties being compared to discover
likenesses or differences between those properties and the property being
valued.
(4) Cash market value
reflected by recent sales of comparable property, if there have been such
sales, may be relevant for determining market value. Proof of the purchase
price alone of the comparable property is not sufficient to fix market value
without evidence of the terms and conditions of the sale.
(5) This approach to value may be implemented
by means of schedules and manuals approved by the division.
(6) Evidence of the sale price of the
property being valued is not sufficient to establish a market value under
Section
7-36-15
NMSA 1978 if the evidence of the sales of comparable property indicates the
sales price was not the market value.
