Property Valuation
What is 'highest and best use as vacant versus as improved' analysis in Hawaii appraisal?
AA. Appraisers only analyze one highest and best use scenario for each property
BB. Appraisers analyze both: 'as if vacant' (ignoring existing improvements) to determine optimal development, and 'as improved' (given existing improvements) to determine whether the current use is optimal or if demolition/renovation would be better✓ Correct
CC. 'As vacant' analysis only applies to undeveloped properties
DD. 'As improved' analysis is only used when there are no comparable vacant land sales
Explanation
The four-part highest and best use analysis is conducted both as if the land were vacant AND as improved. 'As if vacant' determines the best development if the land were available.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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.
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