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Highest and Best Use Decisions
(tertinggi dan keputusan penggunaan
terbaik)
By: Rush land
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Highest and Best Use
(Tertinggi dan Penggunaan Terbaik)
Deinition:The reasonably probable and legal use o !acant land or an
i"pro!ed property# $hich is physically possible# appropriately
supported# inancially easible# and that results in the highest
!alue% The four criteria the highest and best use "ust "eet arelegal per"issibility# physical possibility# inancial easibility#
and "a&i"u" producti!ity% (Penggunaan cukup "ungkin dan
huku" lahan kosong atau properti ditingkatkan# yang "ungkin
secara isik# tepat didukung# layak secara inansial# dan yang"enghasilkan nilai tertinggi% '"pat kriteria penggunaan
tertinggi dan terbaik harus "e"enuhi adalah kebolehan
huku"# ke"ungkinan isik# kelayakan inansial# dan
produkti!itas yang "aksi"al)%
(The Dictionary o Real 'state ppraisal# th ed%# pg% 1*+)
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Purpose o Highest and Best Use
(Tu,uan penggunaan tertinggi dan
terbaik)-arket nalysis pro!ides inor"ation on physical# legal and
econo"ic issues (nalisis Pasar "e"berikan inor"asi tentang
"asalah isik# huku" dan ekono"i)
nalysis o alternati!e uses deter"ines the Highest and Best Use
(nalisis penggunaan alternati "enentukan penggunaan tertinggidan terbaik)
Pro!ides an econo"ic basis or the use inally chosen by addressing
(-e"berikan dasar ekono"i untuk penggunaan akhirnya dipilih
dengan "engatasi):
Utility (.egunaan)
Desire (.einginan)
/carcity (.elangkaan)
'ecti!e Purchasing Po$er ('ek Daya Beli)
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Purpose o Highest and Best Use#
or Real 'state ppraisals
(Tu,uan penggunaan tertinggi dan terbaik#
untuk penilaian real estat) 'stablishes the criteria or selecting co"para ble sales (-enetapkan
kriteria untuk "e"ilih pen,ualan sebanding)
'stablishes the ele"ents o co"parison (-enetapkan unsur perbandingan)
Pro!ides the basis or esti"ates o physical# unctional and e&ternal
obsolescence (-e"berikan dasar untuk perkiraan isik# ungsional dan
eksternal usang)
Pro!ides the basis or orecasts re0uired to apply the inco"e capitaliation
approach (-enyediakan dasar untuk prakiraan $a,ib "enerapkan
pendekatan kapitalisasi pendapatan)
ccupancy (Pe"ilikan)
Ti"ing (absorption) (Ti"ing 3penyerapan)
"ount (capture) (4u"lah3"enangkap)
Rents (/e$a)
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T$o -a,or Parts o a 5aluation
ppraisal (Dua bagian uta"a dari
penilaian !aluasi)1% Basis or 5alue (Highest and Best Use)
Dasar 6ilai (Tertinggi dan Penggunaan Terbaik)
2% pplication o the Three pproaches
(PenerapanTiga Pendekatan)
7atatan: /tudi "enyeluruh dari kekuatan pasar yang
"e"pengaruhi penggunaan dan nilai "e"erlukan
$aktu bela,ar setidaknya setara dengan $aktu bela,ar
yang diberikan kepada "engukur bah$a nilai dengan
"enerapkan teknik yang tepat dan prosedur pendekatan
!aluasi%
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pplication
5acant 9and
"pro!ed Property
9and as though !acant
Property as i"pro!ed
te"s /peciied in Highest and Best Use 7onclusions:
Physical Use
Ti"e (probable use date or occupancy orecast)-arket Participants
Typical User o /pace
-ost Probable type o buyer
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Discussion <uestions
the purpose o a highest and best use study is to
establish the basis o !alue# are the ollo$ing highest and
best use conclusions ade0uate=
5acant 9and: De!elop or retail use $hen the de"and$arrants%
"pro!ed Property: 7ontinue use as a "ulti>tenant oice
building%
the highest and best use state"ents are not ade0uate#$hat is "issing=
?hat "isunderstandings "ay lead to inade0uacies in the
highest and best use conclusions=
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9and Use lternati!es
5acant 9and
6ature o nalysis
consideration o probable alternati!e uses'&tent o the nalysis
Usually in!ol!es "any highly co"petiti!e alternati!e
uses% Re0uires the "ost detailed study (unda"ental
analysis)%
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9and Use lternati!es
9and as though 5acant
6ature o nalysis
"pro!ed property $ill continue in its current use until
the land as !acant# less de"olition cost# is "ore!aluable that the property as i"pro!ed%
'&tent o the nalysis
land !alue does not approach the !alue o the
property as i"pro!ed# a detailed study o alternati!euses is less critical (inerred analysis)%
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9and Use lternati!es
Property s "pro!ed 6ature o nalysis
the i"pro!e"ents contribute to !alue such that the !alue o the
i"pro!ed property is e0ual to or greater than the !alue o the land
as though !acant# the e&isting i"pro!e"ent(s) "ust be considered
as contributing to the propertyCs current highest and best use%
'&tent o the nalysis
Ho$ long and at $hat le!el (occupancy and rents) $ill the current
i"pro!e"ents peror"= (ti"ing issue)
Ho$ long $ill the current i"pro!e"ents contribute to the property !alue= (ti"ing issue)
7an the current i"pro!e"ents be re"odeled# reno!ated or
con!erted# or de"olished in the uture=
re"odeling# reno!ation# con!ersion or de"olition# $hat is the
ti"e ra"e=
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9and Use lternati!es
Proposed Properties
6ature o the nalysis
the assign"ent is to !alue the property at a proposed use# a
detailed "arketability study o that use is re0uired%'&tent o the nalysis
'!en $hen ne$# the proposed i"pro!e"ent "ay not be the
highest and best use o the land as though !acant%
lternati!e uses should be considered
detailed "arketability study o each alternati!e use "ay be
re0uired (unda"ental analysis)
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Testing Highest and Best lternati!es
7riteria
Physically Possible
?hat uses can be constructed on the site=
?hat alterations are physically possible=
9egal Per"issibility
'&isting restrictions as !acant
'&isting restrictions as i"pro!ed
7an e&isting restrictions be changed to allo$ "ore intense use=
?ill deed restrictions increase the propertyCs "arket appeal=
?hat legal attributes gi!e the sub,ect a "arket ad!antage=
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Testing Highest and Best lternati!es
7riteria# continued % % %
inancial easibility
7onsidering Risk and all costs to create and "aintain the use > >
?hat uses# as though !acant# produce a positi!e return to land=
?hat uses# as i"pro!ed# result in a positi!e present !alue=
-a&i"u" Producti!ity
?hich use results in the highest present !alue=
or 5acant 9and: ideal de!elop"ent speciied in ter"s o
density and style
or "pro!ed Property: the i"pro!e"ent re"ains as>is# is
added to# is re"odeled or reno!ated# con!erted to another use
or de"olished%
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Reasonably Probable and de0uately
/upported spects o Highest and Best Use
TheoryTo select use alternati!es that should be tested
To judge the appropriateness o conclusions ro" the
application o each o the highest and best use criteria
Proble"
Deter"ining reasonable probability and ade0uate support is
let to the analystCs judgment
nitial ssess"entBased on "arket acceptability
nly practical to in!estigate alternati!e uses or land or
i"pro!e"ents $hen a reasonable probability e&ists or
potential alternati!e uses
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Reasonably Probable and de0uately
/upported spects o Highest and Best Use
Eoning
t ti"es# it is "andatory to in!estigate the reasonable
probability o a one change%
Relationship o Reasonable Probability andde0uate /upport to the our highest and best use
criteria
-ust address the reasonable probability o "arket
acceptance and de"and or the alternati!e usede0uate support or a reasonably probable# physically
possible and legal use is the irst issue addressed
-ust apply sound ,udg"entF
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Test the Peror"ance o a Property Use:
nor"ation and -easures
Physical Possibility
deter"ined by analysis o the property itsel
te"s considered in testing/ite characteristics
'&isting i"pro!e"ent characteristics
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Test the Peror"ance o a Property Use:
nor"ation and -easures9egal Per"issibility
deter"ined by analysis o the public and pri!ate
restrictions
te"s considered in testing7urrent oning and other land use restrictions
Building 7odes
Pri!ate restrictions
Probability o "odiication or change o currentrestrictions (public and pri!ate)
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Rate actors or Possible Eone 7hange
Dactors 1 2 *
1% The site is not physically suitable or
the use currently allo$ed by oning# but
is physically suitable or the land
de!elop"ent orecasted or the sub,ect%
2% The use orecast or the sub,ect is
co"parable or can be designed to be
co"patible $ith ad,acent land uses%
*% The orecasted probable use o the
sub,ect conor"s to the cityGs
co"prehensi!e plan%
)% 7onditions in the sub,ect area ha!e
changed since the date the current
oning or the sub,ect beca"e acti!e%+% ( public good can be sho$n or the
use o the sub,ect property%
8% There is a history o appro!ed oning
changes to si"ilar properties in si"ilar
locations in other parts o to$n%
;% 6o nearby neighborhood association
is kno$n to oppose si"ilar oning
change re0uests that $ould
acco""odate the orecast use or the
(lternati!es
Analysis of Alternative UsesConsidering the Possibility of a Zoning Change
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Test the Peror"ance o a Property Use:
nor"ation and -easuresinancial easibility'stablishing ade0uate support or a use
detailed "arketability study is needed
7ost o lternati!e Uses
De!elop"ent 7osts
9and ac0uisition and site de!elop"ent
7osts o obtaining necessary appro!als and per"its
Building 7osts
7onstruction and ndirects
'ntrepreneurial incenti!e
Holding 7osts
perating e&penses
7o"parison o alternati!e Uses
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Test the Peror"ance o a Property Use:
nor"ation and -easures
-a&i"u" Producti!ity
The inancially easible use that results in the highest present
!alue
7onidence in the conclusion "ay re0uire a or" o
reconciliation
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7onsideration o lternati!e Uses
5acant 9and
property producti!ity analysis (site# i"pro!e"ents#
legal# and location attributes) usually eli"inates "ost
alternati!es"pro!ed Properties
the property at its current use is orecast to lease up
or stay leased up that insures a !alue at or abo!e the
!alues o the other alternati!es > no urther analysis is
needed% 7urrent use is selected as highest and best
use%
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7onsideration o lternati!e Uses
De"olition lternati!e the !alue o the property in its current use is
signiicantly higher than the !alue o the land as though
!acant# the de"olition alternati!e is eli"inated ro"
urther study%nteri" and3or lternati!e Use o "pro!e"ents
"ust consider alternati!e uses or the ti"ing or de"olition
o e&isting i"pro!e"ents
5acant buildings or Properties operating $ith
e&tre"ely lo$ or negati!e 6
alternati!e uses or alternati!e operation o the current
i"pro!e"ents should be considered in detail
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-athe"atical Procedures
/electing and inancial decision "odel
Three characteristics "ust be realied by the
"odel
1% The "odel "ust consider the a"ount and ti"ingo all cash lo$s%
2% The "odel "ust consider the ti"e !alue o
"oney%
*% The "odel "ust consistently select the use that
$ill produce the highest inancial re$ard%
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-athe"atical Procedures
5acant land and land as though !acantCurrent inancial easibility is not a re0uire"ent
Use "ust eventually be inancially easible to be
considered
easibility Rent is the tool or deter"ining inancialeasibility
easibility rent is the rent necessary to ,ustiy ne$
construction
"arket rent is at or abo!e easibility rent#construction is ,ustiied
"arket rent is less than easibility rent# inancial
easibility can only be achie!ed i "arket rent is
gro$ing aster than e&penses and costs%
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-athe"atical Procedures
"pro!ed Property7urrent inancial easibility is a re0uire"ent
Re0uires that the property !alue as-is "ust be
surpassed by the !alue o the property ater con!ersion#
reno!ation or alteration (7R) less the costs o 7R%lteration can result ro" e&cess or surplus land
lteration can "ean de"olition o i"pro!e"ents
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