of an appraisal
The assessment of the market value is based on basic principles. The highest and best use is one of the most important principles in real estate appraisal.
The highest and best use may be defined as “the reasonably probable and legal use of vacant land or an improved property that is physically possible, legally permissible, appropriately supported, financially feasible, and that results in the highest value.”
The following are generally the factors to consider in the analysis of the highest and best use :
- Surrounding factor : Location of the property, access and neighborhood
- Physical factor : Configuration, topography, dimensions, development potential of a site
- Political factor : Regulation, acquired rights, urban planning
- Economic factor : Supply and demand, market trend
The principle of substitution, another important basic principle, allows the appraiser to verify that a rational buyer will not pay more for one property than for another that is equally desirable. The comparison approach relies on that principle.
