Which statement about highest and best use as vacant and as improved is correct?
Correct Answer
A) A property’s as-vacant and as-improved uses can differ
It is possible for a property’s highest and best use of the land as though vacant to differ from its highest and best use as improved. The as-vacant analysis applies to both vacant and improved properties.
Why This Is the Correct Answer
Option A is correct because a property's highest and best use of the land as though vacant can differ from its highest and best use as improved. For example, existing improvements may continue to contribute value even when a different use would be ideal for vacant land.
Why the Other Options Are Wrong
Option B: The two analyses must produce the same use
Option B is wrong because it claims the two analyses must produce the same use. The as-vacant and as-improved conclusions can differ, which is why both are analyzed.
Option C: Highest and best use as improved applies to vacant land
Option C is wrong because highest and best use as improved applies to property that has improvements, not to vacant land. Vacant land has no existing improvements to analyze.
Option D: Highest and best use as vacant applies to unimproved land alone
Option D is wrong because it limits the as-vacant analysis to unimproved land alone. The as-vacant analysis applies to both vacant and improved properties, since the land is analyzed as though vacant even when buildings exist.
Two lenses, two answers possible
Look at the site with the building erased, then with the building in place. The two views can point to different uses.
How to use: Use the two-lens image to remember that both analyses apply to improved property and may differ.
Exam Tip
Remember that improved property gets both analyses, and their conclusions can differ. Be cautious of options stating the two must match.
Common Mistakes to Avoid
- -Assuming the as-vacant and as-improved conclusions must match
- -Skipping the as-vacant analysis for improved property
- -Applying the as-improved analysis to vacant land
Concept Deep Dive
Analysis
This question tests the relationship between the two highest and best use analyses. The as-vacant analysis considers the land as though vacant, and the as-improved analysis considers the property with its existing improvements. The two conclusions can differ, and the as-vacant analysis is performed for improved properties too.
Background Knowledge
Highest and best use analysis tests uses that are legally permissible, physically possible, financially feasible and maximally productive. For improved property, appraisers consider the land as though vacant and the property as improved; a difference between them can indicate that the improvements are an interim use or suffer from obsolescence.
Real-World Application
An appraiser values an older single-family home on a lot recently rezoned for multifamily use. As though vacant, the highest and best use is apartments, but as improved, the home still contributes enough value to remain in use for now as an interim use.
More Market Questions
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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?
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An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
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