Word of the Day – The Language of Real Estate

Highest and Best Use
 
An appraisal term meaning that reasonable use, at the time of the property appraisal, which is most likely to produce the greatest net return to the land and/or the building over a given period of time.
 
The use must be legal and in compliance with regulations and ordinances within the police power of the county and the state, including health regulations, zoning ordinances, building code requirements, and other regulations.
 
The highest and best use is determined by evaluating the quantity and quality of income from various alternative land uses. Net return normally is interpreted in terms of money, although consideration may be given to such things as amenities.
 
Examples:
Vacant land in a central business district currently used as a parking lot may or may not be employed at its highest and best use, depending on whether the surrounding market is ready for further commercial development.
 
A coin operated carwash site may be more effective as a multifamily apartment, especially if the property is relocated in a revitalization or redevelopment area.
 
For appraisal purposes, land is always valued as though vacant and available for development to its highest and best use.

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