Property Valuation
The principle of 'highest and best use' in Alaska appraisal means:
AThe use that generates the greatest gross income
BThe most profitable legally permissible, physically possible, financially feasible, and maximally productive use✓ Correct
CThe use the current owner prefers
DThe use that requires the least amount of capital investment
Explanation
Highest and best use is the reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive. An appraiser first determines highest and best use as if vacant, then as improved, to establish the basis for the valuation.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
Right of First RefusalA contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.
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