SAEE Highest and Best Use Analysis 2 — Questions and Answers
Question 1: Which of the four tests of highest and best use addresses whether a use is permitted by zoning, building codes, and private restrictions?
- Legally permissible (Correct answer)
- Physically possible
- Financially feasible
- Maximally productive
Correct answer: Legally permissible
The legally permissible test screens uses against zoning, codes, deed restrictions, and other legal limits.
Question 2: A parcel can legally and physically support a 10-unit apartment building, but construction costs exceed the projected value. Which test does this use fail?
- Financially feasible (Correct answer)
- Legally permissible
- Physically possible
- Maximally productive
Correct answer: Financially feasible
A use that costs more than the value it produces fails the financial feasibility test.
Question 3: Highest and best use analysis is typically performed for both the site as though vacant and the:
- Property as improved (Correct answer)
- Neighboring parcels
- Comparable sales only
- Lender's collateral pool
Correct answer: Property as improved
Appraisers analyze highest and best use both as if vacant and as improved.
Question 4: When the value of a property as improved is less than the land value minus demolition cost, the indicated action is usually to:
- Demolish the existing improvement (Correct answer)
- Renovate the improvement
- Refinance the property
- Subdivide the parcel
Correct answer: Demolish the existing improvement
If land value net of demolition exceeds improved value, the improvement no longer represents the highest and best use and removal is indicated.
Question 5: Which factor is part of the physically possible test?
- Soil load-bearing capacity (Correct answer)
- Local zoning category
- Mortgage interest rates
- Property tax rate
Correct answer: Soil load-bearing capacity
Size, shape, topography, and soil capacity are physical characteristics affecting what can be built.
Question 6: Highest and best use must result in the highest:
- Land or property value (Correct answer)
- Building height
- Population density
- Lot coverage
Correct answer: Land or property value
The maximally productive use yields the highest land or property value among legally, physically, and financially viable uses.
Question 7: An interim use is best described as a use that:
- Is temporary until a higher use becomes feasible (Correct answer)
- Violates zoning permanently
- Is the maximally productive use forever
- Cannot generate any income
Correct answer: Is temporary until a higher use becomes feasible
An interim use is a temporary highest and best use until conditions allow a more productive future use.
SAEE Highest and Best Use Analysis 2
Which of the four tests of highest and best use addresses whether a use is permitted by zoning, building codes, and private restrictions?