highest and best use definition
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. HIGHEST AND BEST USE.
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It seems like an unnecessary task but nowhere in the body of knowledge is the relationship expressed explicitly.
. Ad Complete the CE to Renew Your License At Your Pace Online. This would be done by conducting a site analysis. 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.
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 is a real estate term for the most profitable possible use of a property. In order to be considered as the highest and best use of a property however any potential use must pass a series of tests.
The highest and best use may not be the current use of a property. The four criteria that the highest and best use must meet are legal permissibility physical possibility financial feasibility and maximum productivity. Economic drivers of highest and best use -Firms are profit maximizing - LandlordsSellers seek highest price.
We all know that highest and best use HBU analysis is the foundation of any market value estimate and has an important and practical application within our Standards rules. Real estate appraisal term meaning the legally and physically possible use that at the time of appraisal is most likely to produce the greatest net. It does not take into account social or historical value or non-financial benefits like open space.
Property13 Highest and best use and market value are tied to use since value is created through the use of the property. HB Use is defined as. The purpose of this article is to propose the formal incorporation of the concept of interim use into the definition of highest and best use.
The definition of highest and best use is as follows. The Case for a Post-Disaster Highest and Best Use BYDONALDREPLEYPHDCCIMMAI About the Author Donald R. The Fifth Edition of The Dictionary of Real Estate Appraisal by the Appraisal Institute defines highest and best use as.
This article discusses the reasons in support of the incorporation. The conclusion of a highest and best use study could very well be that the highest and best use of the property is to change the propertys current use to a new use but this article suggests this. Reconsidering the Definition of Highest and Best Use.
The highest and best use must be legal physically possible financially feasible and maximally productive. Highest and best use is an important consideration of the appraisal process for a property. Heres everything you need to know about highest and best use in real estate.
If the use is temporary it would then be considered the interim use. Highest and best use is the use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities eg a business within which the asset would be used. In commercial real estate the phrase refers to a property that represents its most profitable and feasible use.
In order to determine the maximum potential of a property Land Use developers often have to embark on a three-step analysis involving property analysis entitlement and constraint analysis and market analysis. Paying a little more attention to HBU will better our profession as a whole and help members prepare improved reports. Nonetheless it remains one useful way of deciding how to use a property.
Definition of highest and best use. Highest and best use. Highest and best use is based on the use that is going to bring the highest value for real estate.
Dictionary of Business Terms. The exact definition of highest and best use varies but generally the use must be the following. The highest and best use is determined by a licensed real estate appraiser whether for vacant land or improved property.
Its actual current use is not relevant to the highest and best use. In real estate appraisals the use of a property that leads to its highest possible value. The possible use of land that will produce the greatest net income and thus develop the highest land value.
Definition 1 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. The definition of highest and best use is as follows. Highest and best use.
Epley PhD CCIM MAI is a USA Distinguished Professor of Real Estate and director for the Center for Real Estate Studies Mitchell College of Business at the University of South. 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. Valuing a property with the concentration of what the property could become to achieve the highest form of profitability is called highest and best.
In such cases one may be able to buy the property for less than its ideal value. When a site contains improvements the highest and best use may be determined to be different. Here is the way real estate manager use this definition which should be within IFRS because these are the market participants.
The reasonably probable use of property that results in the highest value.
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