Highest and Best Use Analysis 

 

At the heart of every appraisal report is its highest and best use analysis.  In the highest and best use analysis, appraisers consider the physically possible uses of a property, the legally permissible uses of a property, the financially feasible uses of a property and finally they discuss what may be optimally productive.

 

Limited accessibility, an odd shape, steep topography and / or small size are all examples of physical limitations that can limit the development potential of a property.  Zoning, deed restrictions, CC&R's and / or easements are examples of factors that can limit development potential due to legal permissibility.  As discussed on our market analysis page, market supply and demand factors determine which use or uses are financially feasible.  As an example, at times we find that parcels that has hard commercial zoning are not best suited to commercial development.

 

Appraisers must consider whether a zoning change is "reasonably probable" as part of the highest and best use analysis.  This determination can be critical to the property's correct valuation.  Zoning and Land use plans and maps often provide a great deal of insight into where the local jurisdiction wants the area and the property to go.  Most appraisers, however, contact and interview officials regarding the possibility of a changed use.  Even with the best information available, at times an appraiser will conclude that a zoning change is only "possible," with significant risk associated with approval for another use.    

 

Land use plans, highway corridor plans, zoning overlay districts (like noise and crash zones mapped by airports) and other factors affect the potential use of property.  It is the responsibility of the appraiser to investigate development options and conclude which ones will provide the highest return to the land.

 

In the case of existing improvements, the appraiser must determine if the existing improvements are contributory, or if they provide a return to to the land greater than if the land were vacant and available for development.  The demolition of the existing improvements in favor of re-development is an option always considered by appraisers in their highest and best use analysis.        

 

We have provided "going concern" appraisals and highest and best use consulting work to a number of diverse clients.  If you would like additional information on "going concern" appraisals you can contact us by e-mail at grigdon@cox.net or call us at 1-702-568-6699 with your specific appraisal problem.  We will let you know if we can help you with you appraisal needs.

 

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Copyright 2014 Horizon Village Appraisal

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.