09-28-15 Agenda, Packet & Committee Meeting Notice

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HIGHEST AND BEST USE If an appraisal ultimately answers the question"How Much",then this section summarizes the preceding chapters answering the questions"Who Is The Typical Buyer"and"To What Use Will the Typical Investor Put This Real Estate" Without knowing the answers to these questions,the "How Much"question cannot be answered. The Appraisal Institute definition of Highest and Best Use is as follows: "The reasonably probable and legal use of vacant land or improved property,which is physically possible,appropriately supported,financially feasible,and that results in the highest value." There are therefore four tests: 1) The proposed use must be legally permissible 2)The proposed use must be probable, not speculative, or conjecture. Alternatively, it must be physically possible. 3) The use must be financially Feasible. 4)The proposed use must be maximally productive. These tests are applied two ways. The first is as if the land were vacant and available for highest and best use. (The land is always valued this way) This set of tests will identify the optimum improvements for the site. The second way is to apply the tests to the site as improved. It can be determined then if the present improvements represent the highest and best use. If they do not, the tests will isolate probably physical, functional, and external losses to value. The marginal dollar theory can be employed to determine if the present improvements should be razed to make way for the sites highest and best use. The conclusion will answer the questions "Who is the typical investor?" and"What will the typical investor use the property for?"thereby allowing valuation. 16