What is an example of highest and best use?
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 the criteria for 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 first step in determining highest and best use for a property?
The first step to knowing the highest and best use of the land is understanding the legal regulations of building in the area. You will have to understand some legal terms and considerations to see if the land’s potential use is allowed by law.
What is a highest and best use study?
A highest and best use study seeks to identify which use would bring maximum value to a piece of vacant land or an improved parcel. A highest and best use analysis for a given property must meet certain criteria that flow in sequential order. The order is generally: Legally permissible.
How do appraisers determine highest and best use?
The Appraisal Institute defines highest and best use as “the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible and that results in the highest value.” Appraisers typically apply four tests to determine that use.
What is the first test of highest and best use?
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.
Why is highest and best use analysis important?
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. This article applies to both residential and commercial appraisers.
Why is an analysis of highest and best use of a property important?
3: “Estimating the highest and best use of a property is a critical appraisal component that provides valuation context within which market participants and appraisers select the valuation context within which market participants and appraisers select comparable market information.”
What is the purpose of analyzing the highest and best use of a property as though vacant and of the property as improved?
Highest and Best Use of Property as Improved Use of the property as presently developed must be examined in order to consider demolition of existing improvements and redevelopment, continuation or modification of existing use.
How do you win a maximum and best offer?
How to Win “Highest and Best Offer” Situations
- Offer More Money.
- Pay in Cash.
- Get Pre-Approved.
- Add an Escalation Clause.
- Minimize Contingencies.
- Be Flexible on the Closing Date.
- Write a Personal Letter.
- Work with an Experienced Realtor.
What does maximally productive mean?
Clause: Maximally Productive. Maximally Productive. Of the legally permissible, physically possible, and financially feasible uses of the site as though vacant, an office use would be the most profitable and would be the most probable use of the property.
What does the phrase highest and best use describe?
CUSPAP highest and best use. Definition. 2.8: “the reasonably probable and legal use of property, that is physically possible, appropriately supported, and financially feasible, and that results in the highest value.”