Key
appraisal and
zoning principle employed in
valuing any
parcel of
land or property. Since the
value of a property and its use are closely linked, its highest and best use is that which
results in the highest
present value, and
brings in the greatest net
return over a given
period or the foreseeable
future - within the applicable constraints. The value of, and return on, a property are related to its surrounding environment so its use has to be consistent with the neighboring land use. Because a
property's value is influenced by the
local competitive and political forces, the timing of the
property development is another critical factor.
And, especially in metropolitan
areas, where a property can be put to several different
uses, its
combination of uses is very important. A highest and best use appraisal must
take these four
factors into
consideration: (1)
legal permissibility, (2) physical possibility, (3)
financial feasibility, and (4)
maximum productive use. However, even the most detailed appraisal is simply a considered opinion of an
appraiser, not the
final word.