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?
Why The appraiser values the property based on its highest and best use as commercial, which may exceed its value as residential Is Correct
Answer B: The appraiser values the property based on its highest and best use as commercial, which may exceed its value as residential
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
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Key Terms to Know
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
ZoningLocal government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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