Property ValuationIntermediateNorth Carolina Exam

The 'highest and best use' of a property in NC appraisal practice is defined as the use that is:

AThe use preferred by the current owner

BLegally permissible, physically possible, financially feasible, and maximally productiveCorrect

CThe most historically significant use

DThe use that generates the highest tax revenue, which is the approach most often followed

Why Legally permissible, physically possible, financially feasible, and maximally productive Is Correct

Answer B: Legally permissible, physically possible, financially feasible, and maximally productive

Highest and best use is the legal, physical, financially feasible, and maximally productive use that results in the highest property value.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

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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.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

Fiduciary Duty

The highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

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