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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 analysis considers legal permissibility, physical possibility, financial feasibility, and maximum productivity. A use that fails an earlier test cannot become the highest and best use merely because it appears profitable. Current zoning is central to the legal test, but a reasonably probable change in zoning can be considered when supported by market and planning evidence rather than speculation.

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.

Test the distinction

A relevant question from Valuation and Analysis, selected because its facts or explanation use this concept.

Valuation and Analysis ยท 14%Value

What does highest and best use mean?

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

Primary sources

Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.

Where this is tested

Property Valuation and Financial AnalysisAll three official DRE valuation topics in one practical guide: value principles, the sales comparison, cost and income approaches, and the financial analysis that turns property data into a defensible answer.14%Practice Valuation and Analysis28 questions on this area, every option explained.Practice

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