Property Valuation
Highest and best use in appraisal is defined as the use that is:
AThe most profitable use regardless of feasibility
BLegally permissible, physically possible, financially feasible, and maximally productive✓ Correct
CThe use the owner prefers
DDetermined solely by current zoning
Explanation
Highest and best use must meet four criteria: legally permissible, physically possible, financially feasible, and maximally productive (the use that produces the highest value).
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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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