Property Valuation
An appraiser determines that the highest and best use of a parcel is for commercial development, not its current residential use. How does this affect the appraisal?
AThe appraiser must value the property at its current residential use only
BThe appraiser values the property based on its highest and best use as commercial, which may exceed its value as residential✓ Correct
CThe appraiser must notify the zoning board before proceeding
DHighest and best use only applies to vacant land, not improved properties
Explanation
Highest and best use (HBU) is a foundational appraisal concept requiring that a property be valued at its most productive legal use. If HBU as vacant or with a different improvement exceeds current use value, the appraiser reflects that in the estimate of value. HBU applies to both vacant land and improved properties.
Related California Property Valuation Questions
- What is the 'principle of conformity' in real estate appraisal?
- Which appraisal approach is most commonly used for single-family homes?
- The principle of progression in real estate means:
- The 'highest and best use' of a property is defined as the use that meets all four of which criteria?
- Net Operating Income (NOI) is calculated as:
- Gross Rent Multiplier (GRM) is calculated as:
- A property has a GPI of $120,000, 5% vacancy and credit loss, and operating expenses of $45,000. What is the NOI?
- A Competitive Market Analysis (CMA) prepared by a real estate licensee differs from a formal appraisal in that:
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