Which set lists the four tests of highest and best use?
Correct Answer
A) Legally permissible, physically possible, financially feasible, maximally productive
Highest and best use is the legally permissible, physically possible, financially feasible (or probable) and maximally productive use. Conformity, contribution, progression and regression are principles of value; utility and scarcity are prerequisites of value.
Why This Is the Correct Answer
Option A is correct because highest and best use is the legally permissible, physically possible, financially feasible (or probable), and maximally productive use that produces the highest residual land value. These four tests are applied in sequence to narrow the possible uses. They are used for both the site as though vacant and the property as improved.
Why the Other Options Are Wrong
Option B: Conformity, contribution, progression, regression, substitution and balance
Option B, conformity, contribution, progression, regression, substitution and balance, lists principles of value, not the four tests of highest and best use.
Option C: Utility, scarcity, private ownership and effective purchasing power
Option C, utility, scarcity, private ownership and effective purchasing power, lists conditions that create value, not the tests of highest and best use.
Option D: Location, site size, building condition and effective age of the improvements
Option D, location, site size, building condition and effective age, lists property characteristics an appraiser describes, not the four tests of highest and best use.
Legal, Physical, Financial, Maximal
Remember the order Legal, Physical, Financial, Maximal: permissible, possible, feasible, productive.
How to use: Use this to recall the four tests in their usual sequence.
Exam Tip
The four tests end in 'permissible, possible, feasible, productive'; lists of principles or value conditions are distractors.
Common Mistakes to Avoid
- -Confusing principles of value with highest and best use tests
- -Listing the conditions that create value as highest and best use tests
- -Applying maximal productivity before financial feasibility
Concept Deep Dive
Analysis
This question tests recall of the four tests of highest and best use. Highest and best use is the legally permissible, physically possible, financially feasible and maximally productive use. The distractors are lists of other appraisal concepts: principles of value, the elements of value, and property characteristics.
Background Knowledge
The four tests of highest and best use screen possible uses: first what is legal, then what is physically possible, then what is financially feasible, and finally which feasible use is maximally productive. Principles of value and the conditions that create value are related but separate concepts. Highest and best use analysis underlies the approaches to value.
Real-World Application
An appraiser evaluates a vacant parcel by first checking zoning, then soil and size constraints, then market feasibility of permitted uses. Finally, the appraiser picks the feasible use that produces the highest land value as the highest and best use.
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