Highest and Best Use:
– The Dictionary of Real Estate Appraisal 6th Edition
A highest and best use study seeks to identify which use would yield the highest residual land value. Sometimes the highest and best use is different from the current use. When conducting a highest and best use study, our appraisers look at many different factors that can influence the residual land value overall. For example, an appraiser needs to examine a property’s location taking into account surrounding land uses when conducting a highest and best use study. Highest and best use studies can be completed separately from an appraisal as a stand-alone assignment.
Highest and Best Use as Though Vacant
When analyzing a property for its highest and best use as though vacant, appraisers seek to identify the highest and best use of the land as if it were available for development. This can either be done by hypothetically assuming there are no improvements if already improved, or by examining the existing characteristics of the land, if vacant. There are two highest and best use options for a vacant site, either the land is left vacant or it is developed. If the land is left vacant, appraisers should answer, when would future development be financially feasible and are there any interim uses? If the land is to be developed, appraisers should answer, what kind of improvement should be built?
Highest and Best Use as Improved
The highest and best use as improved analysis is appropriate if the subject property is already improved or is slated for new construction.
- Continue the existing use
- Modify the existing use
- Demolish the existing improvements and redevelop the site
The analysis takes into account the existing improvements as well as demolition costs or adaptation costs if the highest and best use is different from the current use.
Our appraisers are fluent in local city codes, construction restrictions, and building codes. Our past clients have included developers, architects, engineers, land planners, lending institutions, non-profits, city planners, and elected officials. Whether you need dependable unbiased third-party confirmation of a development project or are seeking critical analysis, information, and opinions regarding the market potential of a planned project, change of use (zoning change), or a planned joint venture, Lake State Realty can help!