“The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity .
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 are the two values considered during a highest and best use Habu analysis?
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 does the appraiser hope to establish when determining the highest and best use of property as improved?
The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved. This treatment recognizes that the existing improvements should continue in use until it is financially feasible to remove the dwelling and build a new one, or to renovate the existing dwelling.
What would be the highest and best use of this 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 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 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 is principle of highest and best use?
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 .
What are the 4 tests for 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.
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 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 .
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 does highest and best offer mean?
“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 principle of substitution?
The principle of substitution states that the upper limit of value tends to be set by the cost of acquiring an equally desirable substitute , assuming no untimely delays. A prudent investor would pay no more for an income-producing property than it would cost to build or purchase a similar property.
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.
What are the physical components of real property?
The broader term real property includes the physical land (the surface and what lies below and above it), everything that is permanently attached to it—whether natural or artificial—plus all the rights of ownership , including the right to possess, sell, lease, and enjoy the land.
