Property Valuation
The principle of HIGHEST AND BEST USE means the use that is:
AThe most expensive development possible on the land
BLegally permissible, physically possible, financially feasible, and maximally productive✓ Correct
CThe current use of the property
DThe most environmentally friendly use available
Explanation
Highest and best use is the reasonably probable and legal use that produces the highest value. It must be legally permissible, physically possible, financially feasible, and maximally productive.
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Key Terms to Know
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.
AppraisalA 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.
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