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<br />HIGHEST AND BEST USE <br /> <br />, J <br /> <br />..J <br /> <br />Fundamental to the concept of value is the theory of highest and best use. Land is valued as if vacant <br />and available for its highest and best use. <br /> <br />" <br /> <br />...J <br /> <br />The Appraisal Institute in The Appraisal of Real Estate, Eleventh Edition, defines highest and best <br />use as follows: <br /> <br />" <br /> <br />, _J <br /> <br />The reasonably probable and legal use of vacant land or an improved property, which is physically <br />possible, appropriately supported, financially feasible, and results in the highest value. <br /> <br />~ --, <br /> <br />" <br /> <br />Land has limited value unless there is a present or anticipated use for it; the amount of value depends <br />on the nature of the land's anticipated use, according to the concept of surplus productivity. Among <br />all reasonable, alternative uses, the use that yields the highest present land value, after payments are <br />made for labor, capital, and coordination, is generally regarded as the highest and best use ofthe land <br />as though vacant. <br /> <br />, J <br /> <br />, l <br /> <br />The highest and best use of a property as improved refers to the optimal use that could be made of <br />the property including all existing structures. The implication is that the existing improvement <br />should be renovated or retained as so long as it continues to contribute to the total market value of <br />the property, or until the return from a new improvement would more than offset the cost of <br />demolishing the existing building and constructing a new one. <br /> <br />. ,J <br /> <br />.,) <br /> <br />" <br /> <br />. J <br /> <br />In estimating the highest and best use there are essentially four stages of analysis: <br /> <br />., J <br /> <br />1. <br /> <br />Possible Use. What uses of the site being appraised are physically possible? <br /> <br />, , <br /> <br />2. <br /> <br />Permissible Use (Legal) What uses are permitted by Zoning and Deed Restriction, <br />if any? <br /> <br />. --' <br /> <br />~ -, <br /> <br />c __J <br /> <br />3. <br /> <br />Feasible Use. Which possible and permissible uses will produce a net return to the <br />owner of the site? <br /> <br />,_u_) <br /> <br />4. <br /> <br />Ma.ximallv Productive. Among feasible uses, which use will produce the highest <br />net return to the owner of the site? <br /> <br />. ) <br /> <br />The highest and best use of the land (or site), if vacant and available for use, may be different from <br />the highest and best use of the improved property. This is true when the improvements are not an <br />appropriate use, but make a contribution to the total property value in excess of the value of the site. <br /> <br />, , <br /> <br />,_ J <br /> <br />, , <br /> <br />The following four point test is required in estimating the Highest and Best Use. The use must be <br />legal. The use must be probable, not speculative or conjectural. There must be a profitable demand <br />for such use and it must return to the land the highest net return for the longest period of time. <br /> <br />,---' <br /> <br />QUINLIVAN APPRAISAL <br /> <br />\_.J <br /> <br />, l <br /> <br />24 <br />