How do you determine the highest and best use of a property?
A property must be appraised in terms of its highest and best use. The definition of highest and best use is as follows: The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
What is the highest and best use principle?
1: “That reasonably probable and legal use of vacant land or an improved property which is physically possible, appropriately supported, financially feasible, and that results in the highest value.” 12.34.
What is the first step in determining highest and best use for a property?
The first step in identifying the highest and best use is examining what can be physically done with the property with the existing infrastructure currently in place.
What is a reason to conduct an analysis of highest and best use on a property as if vacant?
Why is the highest and best use so important in the appraisal process? It is because the highest and best use determines the most profitable use of the site, whether the subject is vacant land or an improved property on the site.
What is the highest and best use of my time?
When it comes to appraising real estate, there’s a concept called “Highest and Best Use” which states that the market value of real property is based on the highest and best use of that property.
What does highest and best mean in real estate?
Why do Realtors say “highest and best?” “Highest and best” means that the seller has multiple offers and doesn’t wish to negotiate. Instead, they want to get final offers from each buyer, with their highest offer and best terms, so they can compare and pick one.
What is the first test of highest and best use?
The first test of highest and best use simply evaluates whether it is possible to use the land in a certain way. Ignoring the zoning and economics of the proposal, consider whether or not the potential use is physically possible.
What are the four criteria for highest and best use?
The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Why is highest and best use important?
Most appraisers agree that the highest and best use analysis is an integral component of their toolkit. This analysis allows appraisers to understand what form of development will be most profitable at the site and even accounts for adaptations within legal limitations.
What is physically and financially feasible legal and the most productive for a property?
HABU is the reasonably probably and legal use of vacant land or an improved that is legally permissible, physically possible, financially feasible and maximally productive, and that results in the highest value.
What property types use the income approach to determine value?
The income approach is typically used for income-producing properties and is one of three popular approaches to appraising real estate. The others are the cost approach and the comparison approach. … The income approach discounts the future value of rents by the capitalization rate.
What does maximally productive mean?
Maximally Productive. The fourth test is essentially a test for maximum return. The appraiser is seeking the most profitable (maximally productive) among all physically possible, legally permitted, and financially feasible uses.
Which type of appraisal report is the most formal?
The narrative appraisal report is the longest and most formal format for reporting and explaining appraisal conclusions and contains a step-by-step description of the facts and methods used to determine value. Self-contained narrative reports are typical in appraisals of major income-producing properties.
What would be the cost to develop 185 lots?
Multiplying 185 lots by $30,000 per lot equals development costs of $5,550,000.
What is most accurate regarding valuation processes?
An estimate of a property’s value by an appraiser who is usually presumed to be expert in his work. A valuation placed upon property by a public officer or a board, as a basis for taxation. … This method works best when the improvements are relatively new and estimates of depreciation are thus more likely to be accurate.