Home Appraisal FAQs - Appraisals How is the Highest and Best Use of a real estate proterty determined?
How is the Highest and Best Use of a real estate proterty determined?

Highest & Best UseThe Highest and Best Use is an analysis step in the appraisal process. To be considered as the Highest and Best Use of a property, any potential use must pass a series of four tests. The exact definition of Highest and Best Use varies, but generally the use must be:

  • Legally Allowable - determine all uses which are legally permissible for the property.
  • Physically Possible – of the legal uses, it is determined which ones are physically possible.
  • Financially Feasible – of those uses, the ones that are financially feasible and economically supported are determined.
  • Maximally Productive – of the remaining possibilities, there is one maximally productive use for the site.

This remaining use is the Highest and Best Use. This same exercise must be conducted for the subject property as it is currently improved and as if vacant and ready for development.

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