A site is zoned for a 10-story mixed-use tower, and the parcel can physically support that design. However, market rents are too low to cover development costs, while a 3-story retail project would earn a profit. What is the best highest and best use conclusion as of the appraisal date?
Correct Answer
B) The 3-story retail project, because it is the feasible and productive option
A legal and physically possible use still fails highest and best use if it is not financially feasible. Because the tower does not support its cost while the smaller project would produce a profit, the feasible and more productive retail project is the stronger conclusion.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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