What is 'highest and best use' in real estate?
Why The most profitable, legally permitted, physically possible, and financially feasible use of a property Is Correct
Answer B: The most profitable, legally permitted, physically possible, and financially feasible use of a property
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
Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
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.
Math Concepts
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