Property Valuation
The highest and best use of a property is defined as the use that is:
AThe current legal use
BLegally permissible, physically possible, financially feasible, and maximally productive✓ Correct
CMost profitable regardless of zoning
DPreferred by the local municipality
Explanation
The highest and best use is the reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive — resulting in the highest property value.
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Key Terms to Know
Zoning
Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
Fiduciary DutyThe highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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