Eddie, I will agree with everything George and Jim said, and I will add something that might provide some clarification for you. This is some text that I blatantly stole out of some text book sometime, and modified slightly to suit my purposes:
Highest and best use is defined as the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
To estimate highest and best use, four elements or tests are considered:
(1) Possible use. What uses of the site are physically possible?
(2) Permissible legal use. What uses of the site are permitted by zoning and deed restrictions?
(3) Feasible use. Which possible and permissible uses will produce a net return to the owner of the site?
(4) Highest and best use. Among the feasible uses, which use will produce the highest net return or the highest present worth?
The highest and best use of the land or site if vacant and available for use may be different from the highest and best use of the improved property. This is true when the improvement is not an appropriate use, but does make a contribution to the total property value in excess of the value of the site.
The foregoing tests must be met and applied, in order, before highest and best use can be determined. In other words, the use must be possible. The use must then be considered to be legal and probable, not speculative or conjectural. A demand for the use must exist and it must yield the highest net return to the land for the longest period of time. These tests are applied both to the vacant land and to the improved property.
I'm certain that you probably have seen this sometime before, but may not have thought it through in terms of your assignment.
You said that the H&B use of the subject (I'm assuming, as improved) was SFR. The quickest and easiest test of this is to compare an approximate value of the improved property as an SFR to the value of the land, as if vacant, at
its higest and best use. So when you look at commercial properties in the area that have sold as vacant land and compare them with the subject is the value lower than the improved value of the subject? If so, then your initial statement is probably true and SFR is H&B use of the
improved property. But remember, and this is where a lot of appraisers goof up, that you have to apply the tests
in order for
both the property as improved and for the land as if it were vacant and ready for development.
So, if you have a physically possible and feasible use for the vacant land that meets the legal requirements of some commercial use and that use would make the land more valuable than the property, as improved, then the improvements do not add value and the present use is no longer at H&B. Conversely, if it is at H&B use, as presently improved, then it still might be an interim use. So... while the remaining physical life of the improvements might be 100 years or more, the remaining
economic life of those improvements might be less, probably much less, like maybe one or two years.
If you already considered all of this (and more) then I apologize for pointing out the obvious (to you). But, like George said, this is, in all probability, a complex assignment and it may be difficult to collect enough fee to make it worth doing.
It is unusual for a zoning authority (at least in my area) to restrict SFR construction in this way unless the area land use is in process of changing from SFR to commercial. If it is in such a process, the commercial value of the land might be quite high - much higher than typical residential building lots.
