RockSpringCluB-Hendricks Appraisal.pdf

HIGHEST AND BEST USE Highest and best use of land or a site as though vacant assumes that a parcel of land is vacant or can be made vacant by demolishing any improvements. With this assumption uses that create value can be identified, and the appraiser can begin to select comparable properties and estimate land value. Land as though vacant is a fundamental concept of valuation theory and the basis of the Cost Approach. Highest and best use is the logical, legal, and most probable use that will produce the highest net return to the investor over a sustained period of time. It is also the available use or program of probable future utilization that produces the highest present land value. Source: Controversies in Real Property Valuation - 1982 Published by The American institute of Real Estate Appraisers. In determining the highest and best use of a property, the parcel is viewed as if vacant and ready to be developed to its’ highest and best use. If the property is currently improved, a determination as to whether or not the present use represents the highest and best use is made. The highest and best use of a vacant parcel is usually determined by that use which results in the highest return on the land or the highest land value, after all deductions for the cost of development are made. The deductions include the cost of labor, capital and coordination. As discussed herein, the highest and best use of an improved property requires an analysis of four (4) basic elements. It must be determined if the use is Legally Permissible, Physically Possible, Financially Feasible, and Maximally Productive on the site. In the analysis of determining the legally permissible uses of a property, external factors such as zoning regulations, restrictions, municipal building codes and requirements, as well as environmental regulations must all be considered. The site is also analyzed to determine if it would be physically possible to develop. Careful consideration is given to the size, shape, dimensions, topography, and utility of the parcel. The property is further evaluated to determine if the use found to be legally permissible and physically possible on the site would also correspond to the most profitable use. The most profitable use is generally regarded as that use which produces or yields the highest net return. In some instances, a use which would

e site would also correspond to the most profitable use. The most profitable use is generally regarded as that use which produces or yields the highest net return. In some instances, a use which would usually tesult in a high net return in one market area, would not be the most profitable use in another due to external factors such as supply and demand. 58 REAL ESTATE sa ~ APPRAISALS | G RESEARCH Continued . ..