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Pass California

Valuation and Analysis, 14% of the examination

Highest and best use

The legally permissible, physically possible, financially feasible use that produces the highest value.

The four tests run in order, and every appraisal begins with them because value depends on use. Current zoning is a factor in the legal test but not the whole of it, since a reasonably probable rezoning can be considered where evidence supports it.

See also

Market valueThe most probable price a property should bring in a competitive and open market, with buyer and seller each acting prudently and neither under duress.

See it in a question

One question from Valuation and Analysis, so the term lands in the context the exam uses it in.

Valuation and Analysis ยท 14%Methods of Estimating Value

An appraiser values a 40-year-old single-family home in an established neighbourhood with many recent sales. Which approach carries the most weight?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Property Valuation and Financial AnalysisThree short sub-topics carrying fourteen percent, and most of the arithmetic on the exam. The three approaches to value, and the income analysis that turns a rent roll into a number.14%Practise Valuation and Analysis28 questions on this area, every option explained.Practice

Other terms in this area