Appraisal - Highest and Best Use

Question 1

Zero economic life

Answer 1

• Not at the highest and best use
• No longer contribute values
• Structure has higher and better use or should be converted

Question 2

Highest & Best Use (factors)

Answer 2

Ideal Use of the Site, not type or size of the improvement
Legally Permissible (zoning, private/public limitation)
Physically Possible (size)
Financial Feasible
Most Profitable

Question 3

Modernization

Answer 3

Update a property to meet the current expectation of the typical buyer.
*remodeling and renovation may be executed without buyer’s expectation

Question 4

Land should be analyzed as if vacant & ready for development

Answer 4

Sites should be valued on potential (highest and best use, 4 agents) rather than current use.

Question 5

Land

Answer 5

Do not depreciation or waste away

Question 6

Highest and Best Use (4 agents)

Answer 6

C - Capital
E - Entrepreneurship
L-Land
L-Labor

Question 7

What is next after data collection and property description?

Answer 7

The highest and best use

Question 8

Legal permissible

Answer 8

zoning

public and private limitation/restrictions

Question 9

Physical possible

Answer 9

size

Question 10

Development

Answer 10

Highest & Best use for development ->

determine what type of improvement should be built

Question 11

Value>Improved+demolish cost

Answer 11

Highest and Best Use = Vacant

Should demolish the house

Question 12

Long Term Lease

Answer 12

Affect highest and best potential of the property, commitment may limit a more profitable use

Question 13

Interim use case

Residential use -> commercial

Answer 13

Land cannot be valued based on one use and improvement valued based on another.
The principle of consistent use

Question 14

Intended Use

Answer 14

Credibility

Question 15

Market warrants a 10% return for completing deferred maintenance

Answer 15

Recommended Value = Value of the property x 110% (1.10) - deferred maintenance cost

Question 16

Most profitable use

Answer 16

1. NOT on public use

2. Can be profitable if zoning does not allow the ideal use

Question 17

Highest & Best Use (primary purpose)

Answer 17

to establish the contributory value of the improvements

Question 18

Well-kept houses surrounded by well-kept houses

Answer 18

1. Highest and Best Use

2. Conformity

Question 19

Excess land

Answer 19

Stand alone highest & best use

Unneeded land

Question 20

Surplus land

Answer 20

No Stand alone highest & best use

Result of having too much land, connected with law of decreasing return

Question 21

The Principle of Comformity

Answer 21

Physical characteristic

*least important to financial feasibility

Question 22

Standard 2-2

Summarized report

Answer 22

highest & best use conclusion must be summarized

Question 23

Illegal Income Units

Answer 23

4 units of income stream cannot be developed in income approach

Question 24

Financial feasibility

Answer 24

External Obsolescence

Question 25

Highest and Best Use

Market Value

Answer 25

Financial and economical analysis of the subject property