A property whose improvements no longer represent the site's highest and best use is described as:
Correct Answer
C) Improved to a use that has become an interim or transitional one
Why this is correct: A property whose improvements no longer represent the site's highest and best use is described as improved to a use that has become an interim or transitional one. The existing building is functionally adequate and may still earn income, but the land's potential supports a different, more valuable use. This signals that the improvements may be suffering from external obsolescence and are not contributing their full cost to value. Why the other choices are wrong: "Subject to an extraordinary assumption" is an appraisal condition, not a property description. "Legally nonconforming under the currently adopted zoning ordinance" describes a use that was legal when established but no longer conforms to new zoning; it may or may not be the highest and best use. "Exempt from the highest and best use analysis" is false; all appraisals require this analysis. Exam tip: Recognizing a transitional use is key to identifying when a property is ripe for redevelopment.
Why This Is the Correct Answer
Why this is correct: A property whose improvements no longer represent the site's highest and best use is described as improved to a use that has become an interim or transitional one. The existing building is functionally adequate and may still earn income, but the land's potential supports a different, more valuable use. This signals that the improvements may be suffering from external obsolescence and are not contributing their full cost to value. Why the other choices are wrong: "Subject to an extraordinary assumption" is an appraisal condition, not a property description. "Legally nonconforming under the currently adopted zoning ordinance" describes a use that was legal when established but no longer conforms to new zoning; it may or may not be the highest and best use. "Exempt from the highest and best use analysis" is false; all appraisals require this analysis. Exam tip: Recognizing a transitional use is key to identifying when a property is ripe for redevelopment.
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An appraiser is valuing the leasehold interest in a property where the contract rent is $2,000 per month and the market rent is $2,500 per month. The lease has 5 years remaining. Using a 10% discount rate, what is the value of the leasehold interest?
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