Highest and best use written summary

[gregford]

Just curious? Most are going to be as so as improved for residential use. What are good examples of written summary HBU for a 1004? Should I summaries all 4; legally permissible, physically possible, financially feasible, and must provide more profit than any other use of the site would generate. Should this area of the 1004 (this is one line) typically spill over into the addendum? I would think that zoning and zoning description is most often speaking to the legally permissible and is summarized. What is an acceptable summary?

 

[SJFCenTex]

The existing improvements represent the highest and best use of the subject site. The present use appears to meet the four basic tests of highest and best use, being: legally permitted, financially feasible, physically possible, and bringing the highest return to the land. All of these criteria must be met if the improvements are to be considered as the highest and best use of a site.

Just state the facts.

 

[George Hatch]

Here's another version of the above. It's more of a statement of your conclusions than a summary of the analysis but it does demonstrate that you gave it a little thought:

The subject's existing use (which speaks to physically possible) as 1-family use is legally permissible under the current RS-5 (Single Family Residential, 5000sf min) zoning. This existing 1-family use is worth more than the underlying land value as if vacant so it can also be considered financially feasible. When compared to the underlying site value and within the context of its proximate uses, the existing use can also be considered to represent the most profitable use of the property at this time and is deemed to be an adequate expression of the concept of highest and best use of the property in it's "as improved" state . There are no legal uses that would appear to economically justify the removal of the existing improvements at this time. ​

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The part in red is the only line that you would normally edit in most cases. However, the rest of it is covering a lot of ground so while you may not have a reason to change it most of the time you still need to be aware where this existing use stands WRT any trends for redevelopment or repurposing the site to a different use or with different improvements. If you've got previously improved properties being purchased for land value in your subject neighborhood then that might indicate that the land was worth more to those buyers than the existing use.

 

[Tim Hicks (Texas)]

Yes, cover them all

 

[GWISC]

Not all of our assignments are within cookie-cutter subdivisions comprise of row after row of single family houses for which a basic summary would suffice.

I have a shell that I start with and then alter to each property that analyzes the HBU vacant and HBU as improved. Some older residential areas are grandfathered for uses due to substandard lots sizes etc... Sometimes you have rural properties with their own set of unique legal uses.

Legally permissible is not just what is defined by zoning. There may be limiting conditions in the warranty deed and/or subdivision rules. Most subdivisions of single family residences have deed restrictions that restrict the uses to only single family even though the zoning may allow other uses. Some of these restrictions may also dictate a minimum site size and house size.

If the HBU vacant is different from the HBU as improved, then you cannot do a cost approach (the land value in the cost approach is based on the HBU as vacant and must be consistent with the current improved use if doing a cost approach).

I just do a complete HBU analysis. If you develop a shell (bold the areas which you will change to suit your property such as zoning, uses and site size requirements as your zoning from property to property and city to village will not be labeled exactly the same). Develop a database for zoning of municipalities (just save a folder to your desktop and organize by city, county et..), copy each city, county, village, townships ordinances and viola you have quick reference for zoning. A lot of work up front, but saves you a ton later.

As for the financially feasible; I will indicate the land value and the value as improved within the HBU as improved. If the value as improved is $1 more than the value as vacant, it is feasible.

An HBU analysis will take up one page within your addendum.

The reason I do an entire HBU analysis is that I do not believe all reviewers (including those in power of granting or revoking licenses) will agree that an HBU summary or abbreviated HBU will suffice. There is always one out there. A complete HBU is not wrong to do even on the most basic properties. There are shells out there. Google some and tailor them to your liking.

 

[BRCJR]

Most only check the box on the URAR. Some quote the definition. Very few summarize their H&BU conclusion as the USPAP requires.

The USPAP says, "when an opinion of highest and best use was developed by the appraiser, state that opinion and summarize the support and rationale for that opinion;"

 

[Tom D]

i got this off some of the threads. over here we have big city blanket zoning for a block of say RM, residential/multi use, or past commercial use, all row homes, so with a single family row home i need to say why the h&b use isn't 2 family use, or commercial use, mixed use, etc. just switch 'use' words. i say 'see addenda' on front page. nothing original here, mostly from the brains on this site, whom i thank:

Several of the blocks have blanket zoning of RM-1. Under this zoning single family residential & multi family uses on the same street are permitted. Single-family dwellings do not require zoning approval. The majority/mostly all dwellings on this block are single family, residential, but may be characterized by a mix of housing types, including detached houses. There are 4 RM districts. These districts are differentiated primarily on the basis of allowed minimum lot area per unit and allowed building heights.

The four tests of highest and best use are: (1) legally permissible (2) physically possible (3) financially feasible and (4) most profitable. The first two tests are interchangeable in order and, the last two are often are combined. Steps Three and Four (financially feasible/most profitable) cannot be determined until the first two steps are analyzed..
Test 1: current use if legally permissible; unit would also be legally permissible
Test 2: the current use is physically possible. multi-family use does not easily lend itself to the current improvement foot-print and floor-plan.
Test 3: the current condition and characteristics of the property do not easily lend itself to conversion to multi family property. The cost of conversion to 2 unit use with the current 1 family layout makes it economically unfeasible to convert. It would not be financial feasible for the other legally permissible uses, as of the effective date of this report. Based on current market conditions, the present use and structure as a single family residence is its financially feasible and maximally productive use.

also, i like this comment, if needed:

Because building codes change from time to time and tend to reflect higher standards and improved technology, an important feature of building codes is that they apply only to new construction and are not applied retroactively to existing buildings. The subject is an existing improvements and per the zoning ordinance does not have to meet the requirements of a new property. The subject was permitted and approved at the time of construction, the use has not changed, therefore the subject is considered to be conforming to the current zoning ordinance per the grandfather clause section of the current zoning ordinance.
Nonconforming Lots:
Minimum R zoning residential lot size in the city is 1,440 Sf. Lower Sf nonconforming lots are common throughout Philadelphia where the typical house predates zoning and maybe situated on a substandard size lot. This has no adverse affect on marketability or value. If the subject were destroyed, the improvement could be rebuilt to its current foot print (subject to city issuance of applicable building permits). Such subject sites were permitted and approved at the time of construction, the use has not changed, therefore the subject is considered to be conforming to the current zoning ordinance per the grandfather clause section of the current zoning ordinance.

 

[Dublin ohio]

This is similar to GH. But dumbed down.

The subject is a legally permissible use based on it's current zoning. The lot size, shape and land-to-building ratio allow the present structure and indicate a good utilization of the improvements. Based on current market conditions, the existing structure as a single family residence is its financially feasible and maximally productive use.

 

[sputnam]

USPAP only requires that you summarize the support and rationale for your opinion of HABU. Most of the time, in residential work, you can do that in one sentence. An example would be, "Based on current zoning and surrounding development, the HABU of the subject is concluded to be continued use as a single family dwelling." Don't boilerplate it though. Some properties will require different, and sometimes, more detailed comments. And, of course, if you just can't help yourself, you can write paragraphs with your analysis of each of the four steps.

 

[The Bob]

I think I copied this off GH post many years ago...

HIGHEST & BEST USE: The subject is a legally permissible use allowed under current zoning. The lot size, shape and utility allow for the present improvements, and based on current market conditions, the existing improvements are the most economically feasible and productive use of the property. If vacant, the highest and best use would be to construct a single family dwelling.