Property Valuation

A property's highest and best use is defined as the use that is:

AThe current legal use of the property

BLegally permissible, physically possible, financially feasible, and maximally productive✓ Correct

CMost likely to be approved by the local zoning board

DThe use for which the property was originally built

Explanation

Highest and best use is the reasonably probable use that is (1) legally permissible, (2) physically possible, (3) financially feasible, and (4) maximally productive — producing the greatest value for the property.

People Also Study

Key Terms to Know

Zoning

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

Fiduciary Duty

The highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.

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.

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Property Valuation Guide

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