highest and best use real estate appraisal
Highest and Best Use or highest or best use HBU is a concept that originated with early economists such as Irving Fisher 1867-1947 who conceptualized the idea of maximum productivity. HIGHEST AND BEST USE EXAMPLE Highest and best use is defined by Real Estate Appraisal Terminology as follows.
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Est and best use is to be considered in valuing real property13 Highest and best use and market value are tied to use since value is created through the use of the property.
. To make this assessment appraisers ask themselves four questions. That reasonable and probable. The highest and best use analysis concept is a form of real estate appraisal that considers not only the best use of the property but any potential use or gains that may come from future ventures.
As defined and explained in this ONLINE Encyclopedia. Most appraisal textbooks define Highest and Best Use as the most profitable legally permitted economically feasible and physically possible use of a piece of real estate. The Four Tests of Highest and Best Use.
Many residential appraisers miss these issues as most lender appraisals are for standard properties such as subdivision homes. Is the use legally permissible physically possible financially feasible and is it maximally productive. Physically possible legally permissible financially feasible and maximally productive.
The residential market analysis and highest and best use qualifying education course will acquaint the student with the basics of analysis. 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. You must consider the size shape topography and accessibility of the site when determining if it is physically possible.
In some cases this analysis can be one of the most important factors in the. Highest and best use is a type of real estate analysis performed by appraisers to determine the best use for a given property. One of the earliest citations of the term is found in the Minutes of the Maine Legislature as early as 1831 in speaking about the assessment and valuation of real estate.
Highest and best use is a central premise in real estate appraisal. The highest and best use of the subject may be something other than its current use. Appraisal highest and best use analysis is critical.
Define what is meant by highest and best use in real estate think about the peculiarities of the market in South Florida when answering the question Assume that you go to list a property and the seller reveals to you that there was a leak in the house in the past. The Fifth Edition of The Dictionary of Real Estate Appraisal by the Appraisal Institute defines highest and best use as. Highest and Best Use is the likely use selected from a number of available choices to which an area of land or a building may be put based on what is physically possible and in compliance with zoning and building regulations and which at the time of an appraisal produces the most profitable.
You can get into Very Big Trouble by just checking the check box which is probably already checked on your form template Appraisal Business Tips Humor for Appraisers. With the highest residual land value is deemed the propertys highest and best use. There are times when the highest and best use of a property may be residential even though the zoning may support a different use.
The Appraisal of Real Estatenotes that holding a. Thats why after determining the zoning class of the property three other questions need to be answered. According to the Appraisal Institute the definition for highest and best use is the reasonably probable and legal use of vacant land or.
Highest and best use is defined in The Appraisal of Real Estate 14th Edition page 332 as the reasonably probable use of property that results in the highest value The criteria for the highest and best use analysis are. The concept of highest and best use is one of the fundamental principles that underlie real estate appraisal. In the eight-step highest and best use process it is clear that the highest value of a property can be currently not legally permissible not physi- cally possible and not financially feasible.
Highest and best use. In the context of most probable selling price another appropriate term to reflect highest and best use would be the most probable use. The conclusion of a highest and best use study could very well be that the highest and best use of the property is to change the propertys current.
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. A potential use cannot be considered to be the highest and best use unless it is all four of the following. Any determination of highest and best use includes identifying the motivations of probable purchasers.
According to The Appraisal Institute The Appraisal of Real Estate 13th Edition link the highest and best use of a property is defined as. Maximum utility Profitability 1. Definition of Highest and Best Use in Real Estate.
Highest and best use requires that the appraisal considers not just the current use of the property but also the potential value associated with alternative uses. 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. Legal permissibility physical possibility financial feasibility maximum productivity.
When determining what use would constitute the highest and best use the appraiser needs to consider many possible uses of the property. Some of the topics you will be assessed on include types of. The quizworksheet combo will test your understanding of Highest and Best Use Test in real estate appraisals.
In appraisal practice the concept of highest and best use represents the premise upon which value is based. The four criteria the highest and best use must meet are. The definition of highest and best use as taken from The Appraisal of Real Estate 13th Edition pages 277-278 and published by the Appraisal Institute is as follows.
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. Highest and best use is always that use that would produce the highest value for a property regardless of its actual current use.
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