Appraisal - Highest and Best Use Flashcards Preview

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Flashcards in Appraisal - Highest and Best Use Deck (25):
1

Zero economic life

-Not at the highest and best use
-No longer contribute values
-Structure has higher and better use or should be converted

2

Highest & Best Use (factors)

Ideal Use of the Site, not type or size of the improvement
Legally Permissible (zoning, private/public limitation)
Physically Possible (size)
Financial Feasible
Most Profitable

3

Modernization

Update a property to meet the current expectation of the typical buyer.
*remodeling and renovation may be executed without buyer's expectation

4

Land should be analyzed as if vacant & ready for development

Sites should be valued on potential (highest and best use, 4 agents) rather than current use.

5

Land

Do not depreciation or waste away

6

Highest and Best Use (4 agents)

C - Capital
E - Entrepreneurship
L-Land
L-Labor

7

What is next after data collection and property description?

The highest and best use

8

Legal permissible

zoning
public and private limitation/restrictions

9

Physical possible

size

10

Development

Highest & Best use for development ->
determine what type of improvement should be built

11

Value>Improved+demolish cost

Highest and Best Use = Vacant
Should demolish the house

12

Long Term Lease

Affect highest and best potential of the property, commitment may limit a more profitable use

13

Interim use case
Residential use -> commercial

Land cannot be valued based on one use and improvement valued based on another.
The principle of consistent use

14

Intended Use

Credibility

15

Market warrants a 10% return for completing deferred maintenance

Recommended Value = Value of the property x 110% (1.10) - deferred maintenance cost

16

Most profitable use

1.NOT on public use
2. Can be profitable if zoning does not allow the ideal use

17

Highest & Best Use (primary purpose)

to establish the contributory value of the improvements

18

Well-kept houses surrounded by well-kept houses

1. Highest and Best Use
2. Conformity

19

Excess land

Stand alone highest & best use
Unneeded land

20

Surplus land

No Stand alone highest & best use
Result of having too much land, connected with law of decreasing return

21

The Principle of Comformity

Physical characteristic
*least important to financial feasibility

22

Standard 2-2
Summarized report

highest & best use conclusion must be summarized

23

Illegal Income Units

4 units of income stream cannot be developed in income approach

24

Financial feasibility

External Obsolescence

25

Highest and Best Use
(Market Value)

Financial and economical analysis of the subject property