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ValuationSubject 8 of 19

Highest and best use

The legally permissible, physically possible, financially feasible and maximally productive use considered in valuation.

Direct answer

What does Highest and best use mean?

The legally permissible, physically possible, financially feasible and maximally productive use considered in valuation.

Exam cue: Apply the tests in order and distinguish the existing use from a use that market evidence supports.

What does it look like in a question?

New York example

Vacant land zoned for apartments is tested for physical capacity and financial feasibility before that use is selected.

Common exam trap

What should you not confuse it with?

The most imaginative or expensive use is not automatically the highest and best use.

Related valuation terms

AppraisalAn opinion of value developed by a qualified appraiser for an identified use, property interest and effective date.CapitalizationThe process of converting income into an indication of value.ComparableA property used as market evidence because it is sufficiently similar to the property being analyzed.Comparative market analysisA broker's analysis of relevant market data to help a seller or buyer consider a probable price range.Cost approachA valuation approach that adds land value to the depreciated cost of the improvements.DepreciationA loss in property value from physical deterioration, functional obsolescence or external obsolescence in appraisal.
Sources used2 references with section locators

The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.

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