When valuing property, which of the following defines "highest and best use"?

The concept of "highest and best use" refers to the most profitable legal use of a property. This definition is central to real estate valuation and helps appraisers and investors determine the maximum value a property can achieve. When assessing a property, professionals analyze potential uses that align with local zoning laws, market demand, and economic factors to establish which use would yield the highest return on investment.

For example, a piece of land zoned for commercial development may be more valuable if used for a shopping center rather than as a single-family home, assuming that the commercial use is legally permitted and aligns with market needs. This principle also promotes an efficient allocation of resources, encouraging the use of land in ways that maximize its utility and profitability.

The original intended use of the property does not necessarily reflect its highest potential value, especially if market conditions or zoning laws have changed. Similarly, focusing solely on physical improvements or auction price points overlooks the broader analysis necessary for determining a property's most valuable use. In short, identifying and leveraging the highest and best use is essential for accurate property valuation and investment strategies.