Property Valuation
In New York appraisal practice, 'highest and best use' is defined as the legally permissible, physically possible, financially feasible, and maximally productive use that results in:
AThe lowest assessed value for tax purposes
BThe highest present value of the land✓ Correct
CThe use preferred by the current owner
DThe use required by the zoning ordinance
Explanation
Highest and best use (HBU) is the reasonable and probable use that, when legally permitted, physically possible, appropriately supported, and financially feasible, results in the highest present value of the land or property.
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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.
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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