Property Valuation
What is the 'highest and best use' principle in real estate appraisal?
AThe most profitable legal use regardless of market feasibility
BThe reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and maximally productive✓ Correct
CThe use that generates the highest gross income
DThe use permitted by right under current zoning with no variances required
Explanation
Highest and best use is the foundation of real estate appraisal — the use that is: (1) legally permissible, (2) physically possible, (3) financially feasible, and (4) maximally productive. It represents the most profitable use that the market will support. The HBU as vacant may differ from HBU as improved.
Related Delaware Property Valuation Questions
- What is 'prospective value' in a Delaware appraisal?
- A Delaware commercial property has a net operating income (NOI) of $90,000 and is purchased for $1,125,000. What is the capitalization rate?
- What is 'external obsolescence' in real property appraisal?
- What is an 'appraisal management company' (AMC) and its role in Delaware real estate transactions?
- What is 'residual land value' analysis in Delaware real estate development?
- What does 'market value' mean in real estate appraisal?
- What is the 'neighborhood life cycle' theory in Delaware real estate valuation?
- In the sales comparison approach, what is a 'comparable sale' (comp)?
Practice More Delaware Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Delaware Quiz →