highest and best use real estate appraisal
Some of the topics you will be assessed on include types of. Alternatively that use from among reasonably probable and legal alternative uses found to be physically possible appropriately.
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According to The Appraisal Institute The Appraisal of Real Estate 13th Edition link the highest and best use of a property is defined as.
. The highest and best use of the subject may be something other than its current use. 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 concept of highest and best use is one of the fundamental principles that underlie real estate appraisal.
The land was classified preceding such. You can get into Very Big Trouble by just checking the check box which is probably already checked on your form template. That reasonable and probable use that supports the highest present value as defined as of the effective date of the appraisal.
Because of the principle of change the appraisers opinion of value is always as of a specific date or timean appraisals effective date. Highest and Best Use or highest or best use is a concept that originated with early economists such as Irving Fisher who conceptualized the idea of maximum productivity. Changes in the demand can be the cause of functional or external obsolescence.
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. 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. According to the Appraisal Institute the definition for highest and best use is 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. Highest and best use. The quizworksheet combo will test your understanding of Highest and Best Use Test in real estate appraisals.
As defined and explained in this ONLINE Encyclopedia. Appraisal highest and best use analysis is critical. In appraisal practice the concept of highest and best use represents the premise upon which value is based.
Thats why after determining the zoning class of the property three other questions need to be answered. Highest and Best Use is a fundamental principal of real estate valuation that takes into account the propertys current and alternate uses to determine which will generate the greatest value. 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.
The highest and best use is determined by a licensed real estate appraiser whether for vacant land or improved property. Many residential appraisers miss these issues as most lender appraisals are for standard properties such as subdivision homes. In commercial real estate the phrase refers to a property that represents its most profitable and feasible use.
The Fifth Edition of The Dictionary of Real Estate Appraisal by the Appraisal Institute defines highest and best use as. Newer or expanding real estate developments are just some of the changes that can affect supply and demand. Is the use legally permissible physically possible financially feasible and is it maximally productive.
HIGHEST AND BEST USE EXAMPLE Highest and best use is defined by Real Estate Appraisal Terminology as follows. To make this assessment appraisers ask themselves four questions. The Appraisal Institute defines highest and best use as follows.
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. As part of the evaluation an appraiser will consider multiple uses for the property before making an assessment. 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 NAIFA in 2002 and 2004 respectively. 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. Any determination of highest and best use includes identifying the motivations of probable purchasers.
Highest and best use is a type of real estate analysis performed by appraisers to determine the best use for a given property. There are times when the highest and best use of a property may be residential even though the zoning may support a different use. 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.
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. In the context of most probable selling price another appropriate term to reflect highest and best use would be the most probable use. 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.
Heres a breakdown of the four criteria that Highest and Best Use must meet. Highest and Best Use is the reasonable probable and legal use of vacant land or an improved property. Download Free Highest Best Use Case Study Real Estate Division Highest Best Use Case Study Real Estate Division Summary -- Introduction -- Past experience and plans for future action -- Legal problems in acquisition and enforcement -- Proposed enabling.
In some cases this analysis can be one of the most important factors in the determination of value for the subject real estate. Appraisers should always remember one factor in a highest and best use analysis. The Dictionary of Real Estate Appraisal defines Highest and Best Use HBU 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.
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 four criteria the highest and best use must meet are.
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