highest and best use real estate meaning
Highest and Best Use. According to The Appraisal Institute The Appraisal of Real Estate 13th Edition link the highest and best use of a property is defined as.
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The Appraisal Institute uses this definition for highest and best use.
. The land was classified preceding such. The most profitable legally. The reasonably probable and legal use of vacant land or an improved property that is physically possible appropriately supported financially feasible and that results in the highest value.
Highest and best use highest and best use an appraisal term meaning the legally financially and physically possible use that at the time of appraisal is most likely to produce the greatest net return to the land andor buildings over a given period. Highest and best use requires that the appraisal considers not just the current use of the property but also the potential value associated with alternative uses. Highest and Best Use or highest or best use is a concept that originated with early economists such as Irving Fisher who conceptualized the idea of maximum productivity.
Highest and best use or HBU is a factor in real estate appraisals that shows how the highest value for property is achieved. Principle of Highest and Best Use. Back to Glossary Index.
More Real Estate Definitons. The reasonable probable and legal use of vacant land or an improved property which is physically possible appropriately supported financially feasible and that results in the highest value. 1031 Exchange 1031 tax deferred exchange.
The first definition of highest and best use is that it is the use for a piece of land or property in general that maximizes your net present value NPV. To begin with a site needs to be physically large enough for the application. The possible use of land that will produce the greatest net income and thus develop the highest land value.
Not all properties can be developed to all uses. Highest and best use is an important consideration of the appraisal process for a property. The highest and best use analysis concept is a form of real estate appraisal that considers not only the best use of the property but any potential use or gains that may come from future ventures.
For example suppose you want to. Highest and Best Use. In other words the highest and best use of a piece of land right in the middle of downtown is probably a high rise office tower since that option provides the greatest NPV.
Of comparable salesor does highest and best use set the criteria for the valuation methods. What is highest and best use in real estate. Highest and Best Use That legal use which at the time of an appraisal is most likely to produce the greatest net return over a given period of time.
When a seller requests highest and best they are asking a buyer to submit their highest and best offer. The reasonable probable and legal use of vacant land or an improved property which is physically possible appropriately supported financially feasible and that results in the highest value. One of the earliest citations of the term is found in the Minutes of the Maine Legislature as early as 1831 in speaking about the assessment and valuation of real estate.
Highest and Best Use Defined. A property must be appraised in terms of its highest and best use. Definition of Highest and best use George Jarrous Real Estate Agent Century 21 Curran Oberski Use of a parcel of land that will produce the greatest current value.
Highest and Best Use is a fundamental principal of real estate valuation that takes into account the propertys current and alternate uses to determine which will generate the greatest value. This is factored with the probable and legal use of the property that is physically possible financially feasible and. In commercial real estate the phrase refers to a property that represents its most profitable and feasible use.
Uses That Are Physically Possible. The definition of highest and best use is as follows. What Does Highest and Best Use Mean.
How Do Appraisers Predict Highest Best Use. Specifically the appraisal institute describes the highest and best use of a property as the reasonably probable and legal use of vacant land or an improved property that is physically. The definition of highest and best use is as follows.
Dictionary of Real Estate Terms. Highest and Best Use is the reasonable probable and legal use of vacant land or an improved property. Highest and Best Use is the likely use selected from a number of available choices to which an area of land or a building may be put based on what is physically possible and in compliance with zoning and building regulations and which at the time of an appraisal produces the most profitable present value of the land.
Heres a breakdown of the four criteria that Highest and Best Use must meet. Permitted feasible and physically possible use. The value must be based on its highest and best use that would produce the highest value for property regardless of its actual current use.
Highest and best use. While some sellers may just accept an offer or negotiate with one offer others will request highest and best to give all buyers an opportunity to submit their best offer. Conceptually highest and best use is a test used by appraisers to determine if a propertys current or intended use finds that productmarket fit.
According to the Appraisal Institute the definition for highest and best use is the reasonably probable and legal use of vacant land or. The reasonably probable and legal use of vacant land or an improved property that is physically possible appropriately supported and financially feasible and that results. Application of Highest and Best Use Principles The Appraisal of Real Estate fourteenth edition states The analysis of highest and best use is at the heart of appraisals of the market value of real property12 It seems logical therefore that.
The concept of highest and best use is one of the fundamental principles that underlie real estate appraisal. A prospective use cannot be considered the highest and best use unless that use would be allowed under current building codes. Definition of Highest and Best Use in Real Estate.
The highest and best use is determined by a licensed real estate appraiser whether for vacant land or improved property. This is extremely common in a hot market when a seller receives multiple offers. You must consider the size shape topography and accessibility of the site when determining if it is physically possible.
A property must be appraised in terms of its highest and best use.
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