highest and best use real estate example
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. The four tests of highest and best use are.
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The highest and Best Use of Real Estate As development picks up consider the competitive forces that shape highest and best use.
. Steps Three and Four financially feasiblemost profitable cannot be determined until the first two. Specifically the appraisal institute describes the highest and best use of a property as the reasonably probable and legal use of vacant land or an improved property that is physically. The four criteria the highest and best use must meet are legal permissibility physical possibility financial feasibility and maximum productivity.
A highest and best use offer is an important part of the real estate process. Browse discover thousands of brands. A prospective use cannot be considered the highest and best use unless that use would be allowed under current building codes zoning ordinances environmental laws and other government regulations.
Remember regardless of the use appraisers find whatever has the greatest net return and follows these four questions is the highest and best use. The top answer we received was Highest and Best Use. Real estate and have 15 years executive experience in the areas of.
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. I hold a JD LLM. In this post on highest and best use analysis we will focus only on real estate although this concept can be applied many other assets.
That reasonable and probable use that supports the highest present value as defined as of the effective date of the appraisal. Maximally productive or maximum productivity is the highest and best use. Define and resolve the highest and best use.
Read customer reviews find best sellers. This evaluation takes into consideration factors such as zoning regulations environmental. State the existing use and the use reflected in the appraisal 6214.
This use must be legally permissible physically possible financially feasible and. Appraisers begin their highest and best use analysis reviewing building codes zoning private restrictions environmental regulations and historic controls. The definition of highest and best use is as follows.
You must consider the size shape topography and accessibility of the site. September 13 2010. The concept of highest and best use was popularized by economists Irving Fisher.
Tests of Highest Best Use in Real Estate. 1 legally permissible 2 physically possible 3 financially feasible and 4 most profitable. Conceptually highest and best use is a test used by appraisers to determine if a propertys current or intended use finds that productmarket fit.
When a site contains improvements the highest and best use may be determined to be different. Heres a breakdown of the four criteria that Highest and Best Use must meet. The net present value of cash flows discounted at a rate of 10 yields a property value of 1485848.
The vacant property is valued at 150000. In real estate highest and best use refers to the reasonable probable and legal use of vacant land or an improved property that is physically possible appropriately supported financially feasible and results in the highest value. 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.
This term refers to the best possible use of a property based on current market conditions. For example if an area is zoned as residential it would be hard for an appraiser to state that the highest and best use of that real estate. The definition of highest and best use of land as if vacant requires appraisers evaluate the following four criteria.
HIGHEST AND BEST USE EXAMPLE Highest and best use is defined by Real Estate Appraisal Terminology as follows. Ad Enjoy low prices on earths biggest selection of books electronics home apparel more. According to Jim Pruitt and the Dictionary of Real Estate Appraisal 6 th Edition Highest and best use is the reasonably probable use of property that results in the highest value.
In order to calculate a homes highest and best offer you need to consider several factors including zoning restrictions the current market value of similar properties and. Highest and Best Use is the reasonable probable and legal use of vacant land or an improved property. The reasonably probable and legal use of property that is physically possible appropriately supported and financially feasible and that results in the highest value.
The first two tests are interchangeable in order and in many circumstances the last two are combined. Alternatively that use from among reasonably probable and legal alternative uses. 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 analysis produces the highest value for a property based on the concept of maximum productivity. This one is pretty self-explanatory as it circles back to the core principle of highest and best use. Highest and best use analysis evaluates each potential use of the property and its corresponding value.
Continuing to use the property for retail space yields an estimated value of 1402222.
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