Highest and best use is defined as the use that is:
Why Legally permissible, physically possible, financially feasible, and maximally productive Is Correct
Answer B: Legally permissible, physically possible, financially feasible, and maximally productive
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
People Also Study
Related California Questions
- Plottage value refers to the increased value resulting from:Property Valuation
- The 'highest and best use' of a property is defined as the use that is:Property Valuation
- The 'highest and best use' of a property is defined as the use that meets all four of which criteria?Property Valuation
- The 'effective age' of a building used in appraisal is best defined as:Property Valuation
Key Terms to Know
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
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →