Property ValuationIntermediateArizona Exam

Highest and best use in real estate appraisal is defined as the use that is:

AThe use that the property is currently being put to

BLegally permissible, physically possible, financially feasible, and maximally productiveCorrect

CThe use that produces the highest possible profit, regardless of zoning or legal constraints

DThe use that the property owner desires and intends for the property

Why Legally permissible, physically possible, financially feasible, and maximally productive Is Correct

Answer B: Legally permissible, physically possible, financially feasible, and maximally productive

Highest and best use is the reasonably probable use that is legally permissible, physically possible, financially feasible, and results in the highest value for the property.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

People Also Study

Key Terms to Know

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Gross Rent Multiplier (GRM)

A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.

Net Operating Income (NOI)

The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.

Math Concepts

Profit & Loss

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Property Valuation Guide

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