A property's zoning permits both single-family and small office use. Determining highest and best use requires the appraiser to:
Correct Answer
B) Test which permitted use is financially feasible and most productive
Why this is correct: Highest and best use (HBU) analysis is a four-step test: legally permissible, physically possible, financially feasible, and maximally productive. When multiple uses are legally permissible (like single-family and office), the appraiser must analyze which one is financially feasible and yields the highest net return (value). Why the other choices are wrong: The choice to choose the use the current owner intends is incorrect; HBU is an objective market test, not subjective intent. The choice to default to residential as more conservative is wrong; HBU is not about conservatism. The choice to average value indications under both uses is false; HBU requires selecting the single most productive use. Exam tip: HBU is not what is, but what should be—the use that gives the highest value.
Why This Is the Correct Answer
Why this is correct: Highest and best use (HBU) analysis is a four-step test: legally permissible, physically possible, financially feasible, and maximally productive. When multiple uses are legally permissible (like single-family and office), the appraiser must analyze which one is financially feasible and yields the highest net return (value). Why the other choices are wrong: The choice to choose the use the current owner intends is incorrect; HBU is an objective market test, not subjective intent. The choice to default to residential as more conservative is wrong; HBU is not about conservatism. The choice to average value indications under both uses is false; HBU requires selecting the single most productive use. Exam tip: HBU is not what is, but what should be—the use that gives the highest value.
More Property Description Questions
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In a leasehold estate, the tenant's interest in the property is called:
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In the rectangular survey system, a section contains how many acres?
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