Property Valuation
In real estate valuation, 'highest and best use' means:
AThe most profitable use currently operating on the property
BThe legally permissible, physically possible, financially feasible, and maximally productive use of a property✓ Correct
CThe use recommended by the local planning board
DThe use specified in the property's deed
Explanation
Highest and best use is the reasonably probable use of a property that is legally permissible, physically possible, financially feasible, and that results in the highest value.
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Key Terms to Know
Deed
A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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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