Posted on: 04th Dec, 2010 02:13 am
My neighbor is planning to appraise a vacant land which is a part of his family since last few years. The main aim of this appraisal is to assess the land value in order to sell it off. Thus, there are no improvements on the land or if there are any improvements, then it will be ignored. Does this challenge the highest and best use?
The highest and best use is basically just an analysis of the feasibility and profitability of the entire range of uses. Just like any appraisal, this analysis can be done with any hypothetical conditions including: with or without the improvements.
There are four basic tests for determining the highest and best use of a property:
1. Physically possible – Is the lot wide enough or long enough for development? Are utilities available? Does the lot have direct access to the right of way? Etc.
2. Legally permissible – Zoning and Ordinances
3. Economically feasible – What is the financial return?
4. Maximally productive – If multiple uses fit the above tests, which one is the best?
By simply applying these tests to a vacant piece of land, you can then determine the most appropriate type of improvements to be placed on that land or if it may be best to remain as vacant land. Today, remaining vacant is commonly the current highest and best use for many lots as a result of the current depression of real estate values. If the value of the land and improvements is significantly less than what it would cost to build on that land, the highest and best use would be as vacant.
To properly answer your question, if the highest and best use of the property, as vacant, is different than, as currently improved, then the cost of removing the current improvements must then be considered in the tests for economically feasible and maximally productive.
There are four basic tests for determining the highest and best use of a property:
1. Physically possible – Is the lot wide enough or long enough for development? Are utilities available? Does the lot have direct access to the right of way? Etc.
2. Legally permissible – Zoning and Ordinances
3. Economically feasible – What is the financial return?
4. Maximally productive – If multiple uses fit the above tests, which one is the best?
By simply applying these tests to a vacant piece of land, you can then determine the most appropriate type of improvements to be placed on that land or if it may be best to remain as vacant land. Today, remaining vacant is commonly the current highest and best use for many lots as a result of the current depression of real estate values. If the value of the land and improvements is significantly less than what it would cost to build on that land, the highest and best use would be as vacant.
To properly answer your question, if the highest and best use of the property, as vacant, is different than, as currently improved, then the cost of removing the current improvements must then be considered in the tests for economically feasible and maximally productive.
Thanks a lot Benjamin :-) That was very helpful of you...
