Property Valuation
In Colorado real estate appraisal, the term 'highest and best use' means:
AThe most expensive use of the land
BThe reasonably probable and legal use that produces the highest value✓ Correct
CThe use currently designated by the zoning code
DThe use preferred by the property owner
Explanation
Highest and best use is the reasonably probable and legal use of vacant land or improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value. It is a cornerstone concept in appraisal.
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Key Terms to Know
Appraisal
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.
Fiduciary DutyThe highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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