An eight-unit apartment building was built legally, but the site has since been rezoned to allow at most four units; the building may remain as a nonconforming use. It is worth $1,300,000 as improved, while the land as though vacant under current zoning is worth $420,000. Which statement about its highest and best use is correct?
Correct Answer
C) As though vacant, the use must be one current zoning allows; as improved, the eight units may continue
The highest and best use must be a legal use, so the land as though vacant is analyzed under the current four-unit zoning. As improved, the existing eight-unit building is lawful and adds far more value ($1,300,000) than the vacant land ($420,000), so continuing it is supported. The two premises can reach different conclusions. Option A ignores the legal test for the vacant premise, option B ignores the value the building contributes, and option D applies the nonconforming status to a hypothetically vacant site where it would not exist.
Why This Is the Correct Answer
Option C is correct because a new building on the vacant site would have to meet the four-unit zoning, while the existing eight-unit building may lawfully continue and is worth $1,300,000 against $420,000 for the land. The as-vacant and as-improved conclusions can differ, and here they do.
Why the Other Options Are Wrong
Option A: As though vacant, the use is eight units, since the existing building proves that density is possible
Option A sets the as-vacant use at eight units because the building shows the density is physically possible. Physical possibility is not enough; the as-vacant use must also be legally permissible, and current zoning allows at most four units.
Option B: As improved, the use is demolition and a four-unit building, since the current use does not conform
Option B calls for demolition and a four-unit building because the current use does not conform. Nonconforming status does not by itself call for demolition, and the improved property at $1,300,000 is worth far more than the $420,000 land.
Option D: Both premises conclude the eight-unit use, because a nonconforming use is legally allowed to remain
Option D concludes eight units under both premises. The nonconforming right attaches to the existing building; if the site were vacant, a new project would have to follow the four-unit zoning.
Vacant follows today's zoning
Picture the site empty and ask what the zoning lets you build now; then picture the existing building and ask whether keeping it pays more.
How to use: Use the two pictures whenever a stem pairs a nonconforming building with current zoning.
Exam Tip
Do not carry a nonconforming use into the as-vacant analysis. It belongs to the existing improvement, which the as-improved analysis evaluates.
Common Mistakes to Avoid
- -Using the existing density in the as-vacant analysis
- -Assuming a nonconforming building should be demolished
- -Treating as-vacant and as-improved conclusions as necessarily the same
Concept Deep Dive
Analysis
The question combines the legal test with the two premises of highest and best use. The as-vacant premise asks what could be built today, so current zoning controls. The as-improved premise looks at the existing lawful building, which may continue and here contributes most of the value.
Background Knowledge
Land is valued at its highest and best use as though vacant, which must be a legally permissible use. The as-improved analysis decides whether the existing improvements should be continued, changed or replaced. A legally nonconforming improvement can be worth more than a conforming replacement, which is why the two premises can differ.
Real-World Application
An appraiser values an older fourplex-zoned lot that holds an eight-unit building from before a downzoning. The land is valued as a four-unit site, the building's contribution is the difference between the improved value and that land value, and the appraiser notes the risks if the building were destroyed.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Infrastructure investment such as a new interchange typically affects nearby land by:
A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
People Also Study
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam