An improved property’s highest and best use as improved analysis might conclude which of the following?
Correct Answer
C) That the existing building should be expanded or replaced
Highest and best use as improved may involve expanding or renovating the existing improvement, or perhaps demolishing and replacing it. Land value is always based on use as though vacant.
Why This Is the Correct Answer
Option C is correct because the determination of highest and best use as improved might involve the expansion or renovation of the existing improvement, or perhaps its demolition and replacement. This analysis focuses on the existing improvements and how they should be used or changed. Expanding or replacing the building is a typical possible conclusion.
Why the Other Options Are Wrong
Option A: That the site value equals the cost of the existing building
Option A, that site value equals the cost of the existing building, confuses two unrelated figures; site value is based on the land's use as though vacant, not on building cost.
Option B: That the land should be valued as if it were improved
Option B, that the land should be valued as if it were improved, reverses the rule; land value is based on its use as though vacant.
Option D: That the current zoning should be ignored in the analysis
Option D, that current zoning should be ignored, contradicts the legally permissible test; highest and best use analysis considers legal constraints such as zoning.
Vacant values land, improved guides building
As though vacant sets the land value; as improved decides what to do with the building.
How to use: Use this to sort answer choices between land-value and building-decision conclusions.
Exam Tip
As-improved conclusions involve the existing building, such as keep, renovate, expand or replace; land value questions point to as-though-vacant analysis.
Common Mistakes to Avoid
- -Valuing land as if improved
- -Equating site value with building cost
- -Ignoring zoning in highest and best use analysis
Concept Deep Dive
Analysis
This question tests what highest and best use as improved can conclude. That analysis asks what should be done with the existing improvements, such as keep, renovate, expand, or demolish and replace them. It does not change how land itself is valued, which is based on its use as though vacant.
Background Knowledge
Highest and best use is analyzed in two ways: the site as though vacant, which supports land value, and the property as improved, which addresses what to do with the existing improvements. As-improved conclusions can include continuing the current use, renovation, expansion, conversion, or demolition and replacement. Both analyses apply the four tests.
Real-World Application
An appraiser analyzes an older one-story house on a corner lot zoned for up to four dwelling units. The as-improved analysis considers whether adding a unit or replacing the house with a fourplex would produce more value than continuing the current use.
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