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Define Highest and Best Use in Real Estate
Highest and Best Use:
"Highest and Best Use" is a term used in real estate that refers to the most profitable, legally permitted, economically feasible, and physically possible use of a property. When determining the highest and best use of a property, real estate professionals consider a variety of factors, including zoning regulations, market demand, and potential development costs. The highest and best use of a property can have a significant impact on its value and potential for development or investment.
Example:
For example, a vacant lot in the middle of a bustling commercial district may have a higher value and potential for development as a retail or office space, rather than as a single-family home. Real estate professionals may analyze the zoning regulations, market demand, and potential development costs to determine the highest and best use of the property.
"A Deep Dive for Real Estate Appraisers"
A few more examples of how the concept of highest and best use might apply during the appraisal process:
- A large, vacant lot located near a residential neighborhood may have the highest and best use as a new residential development, rather than as a commercial property or a park.
- A building that is currently being used as a warehouse may have the potential for a higher and better use as a retail store or a mixed-use development, depending on the zoning and market demand in the area.
- A property that is located near a highway or a major transportation hub may have the highest and best use as a hotel or a mixed-use development that includes both commercial and residential uses.
- A property that is located in an area that is undergoing gentrification may have a higher value and potential for development as a luxury condo building, rather than as a single-family home.
In each of these examples, the highest and best use of the property may not be immediately obvious, and it may require careful analysis of market conditions, zoning regulations, and other factors to determine the most profitable and feasible use of the property.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
The highest and best use, it's a curious thing,
It's the best way to use a property, to make the cash ring.
The most profitable, legally allowed,
Economically feasible, and physically sound.
A vacant lot in the city, it's quite a sight,
But what's the best use, that's the real fight.
Should it be a home, or a shop, or an office so grand,
Analyzing the options, it's all in demand.
The zoning, the market, the costs and the more,
All must be considered, that's for sure.
The highest and best use, it's the key,
To unlocking the value, and making it be.
So remember, my friend, when you're looking at land,
The highest and best use, it's the key to the grand plan!