Lecture 7 Chapter 12

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Lecture 7/ Chapter 12

• Highest and Best Use Analysis

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Highest and Best Use Defined

• The reasonably probably and legal use of vacant
  land or an improved property that is physically
  possible, appropriately supported, and
  financially feasible, and that results in the
  highest value.
• --The Appraisal Institute

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Two Primary Tests for HABU

• Highest and Best Use of Land as Vacant
• Highest and Best Use of Property as Improved

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Real Estate Categories and Submarkets Sites and
Improvements

• Retail
• Fast Food, Gas Station, Bank Branch
• Shopping Centers
• Big-Box Retailers
• Regional Shopping Mall
• Specialty Retailer
• Restaurants
• Automobile Dealer
• Entertainment Hubs
• Lodging
• Residential
• Single-Family
• Multi-Family
• Apartment, Condominiums, Townhomes, etc.

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Real Estate Categories and Submarkets Sites and
Improvements

• Agriculture / Industrial
• Warehousing
• Farming Land
• Timber Land
• Office
• Class A, B, C
• Call Centers
• Multi-Story (high-rise or low-rise) vs. Single
  Story
• Suburban vs. Centralized Office Districts

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Real Estate Categories and Submarkets Sites and
Improvements

• Special Uses
• Hospitals
• Universities
• Churches
• Parking Garages
• Sports Complexes

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Testing Criteria in HABU as Vacant

• Physically Possible
• Size, Shape, Functionality
• Legally Permissible
• Zoning (allowable uses, setbacks, etc)
• Private / Public Controls

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Testing Criteria in HABU as Vacant

• Financially Feasible
• Net revenue Required rate of return
• Considers neighboring land uses
• Considers location, traffic patterns, etc.
• Maximally Productive
• That use which creates the highest return to the
  land, whereby creating greatest overall land
  value

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Testing Criteria in HABU as Improved

• 1. Physically Possible
• Size, Shape, Functionality
• Improvement Condition
• 2. Legally Permissible
• Zoning (allowable uses, setbacks, etc)
• Private / Public Controls
• Test of Conformity

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Testing Criteria in HABU as Improved

• Financially Feasible
• Net revenue Required rate of return
• Considers neighboring land uses
• Considers location, traffic patterns, etc.
• Considers market study (supply, demand)
• Maximally Productive
• That use which creates the highest return to the
  land, whereby creating greatest overall
  improvement value
• As Currently Improved
• As Currently Improved, with Modifications and/or
  Improvements
• As a different improvement / development

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Special HABU Situations

• Legally nonconforming uses
• Interim uses
• Uses not HABU
• Multiple Uses
• Special-Purpose Uses