What is an example of highest and best use in real estate?

For example, assume that “House B” has a value as a house of $200,000, and a site value as a commercial lot of $250,000 with a cost to demolish the house and prepare the site at $25,000. The highest and best use of the site is to demolish the house and sell the site as a commercial lot.

What is high and best use in real estate?

Highest and Best Use, Defined

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.

IT IS IMPORTANT:  Can one executor sell property?

What are the four criteria of highest and best use?

Here’s a breakdown of the four criteria that Highest and Best Use must meet.

  • Physically possible. You must consider the size, shape, topography, and accessibility of the site when determining if it is physically possible. …
  • Legally permissible. …
  • Financially feasible. …
  • Maximally productive.

What is meant by highest and best use from a real estate development point of view?

It’s the basis of all feasibility studies and it’s called highest and best use. Just like smart businesses try and maximise the return on their assets, so should you as a property investor. And overlooking this principle means you won’t maximise the value of your development and get the highest return on your money.

Which of the following is a test used to determine the highest and best use of a property?

The four tests of highest and best use are: (1) legally permissible (2) physically possible (3) financially feasible and (4) most profitable. The first two tests are interchangeable in order and, in many circumstances, the last two are combined.

What would be the highest and best use for a vacant property quizlet?

the highest and best use of a property must be one that is: (1) Legally permissible: the use must comply with laws, regulations, and ordinances. (2) Physically possible: the use must be consistent with the site characteristics and physical features of the property.

What is the importance of highest and best use?

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.

IT IS IMPORTANT:  How do virtual real estate tours work?

When looking at highest and best use what is the primary consideration that the appraiser must take into account?

The appraiser applies four accepted tests in arriving at the highest and best use for a property. The use must be (1) Legally permissible; (2) Physically possible; (3) Economically feasible; and (4) The most productive use. There may be two highest and best uses, one with the site vacant and the other as improved.

When must an appraiser develop an opinion of highest and best use?

Standards Rule 1-3 states that “when necessary for credible assignment results in developing a market value opinion, an appraiser must develop an opinion of the highest and best use of the real estate.” and that STANDARDS RULE 2-2 (a)(x) states “when an opinion of highest and best use was developed by the appraiser, …

What is the purpose of analyzing the highest and best use of a property as though vacant and of the property as improved?

An analysis related to the highest and best use as improved is applicable if the property is improved, or slated for new construction. This analysis seeks to identify the highest and best use of the property while taking into account the existing or proposed improvements.

What is highest and best use quizlet?

The highest and best use is a recognized theory used in conjunction with the appraisal process. This theory is founded in the correlation between the highest probable value of the property and its highest and best use to attain the highest return on the owner’s original investment.

IT IS IMPORTANT:  Can a non resident buy property in New Zealand?

What is the best use of land?

50 Surprisingly Creative Uses for Vacant Land

  • Build a Spec House. …
  • Community Garden. …
  • Wildlife Preservation. …
  • Tiny Houses. …
  • Farming. …
  • Recreation. …
  • Education. …
  • Harvest Timber.

When analyzing highest and best use of a property Uspap requires an appraiser to?

USPAP Standards Rule 1-6 requires the appraiser to: (a) reconcile the quality and quantity of data available and analyzed within the approaches used; and (b) reconcile the applicability of the approaches, methods and techniques used to arrive at the value conclusion(s).

What does the appraiser hope to establish when determining the highest and best use of property as improved?

For improvements to represent the highest and best use of a site, they must be legally permitted, financially feasible, and physically possible, and must provide more profit than any other use of the site would generate.

Which highest and best use criterion would require an appraiser to consider the availability of public utilities to a parcel of land?

The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved. “Financial Feasibility – as Vacant”: Considerations to be made in “physically possible” would include the availability of public utilities to the site.

When embarking on a detailed highest and best use study the first step is usually?

Before we embark on a detailed highest and best use study, the first step ought to be a check of the zoning ordinance to see what uses are allowed. Some areas of the country are still unzoned. ____________ soils absorb water quickly and swell up, causing cracking. A site has a total of 95 acres.