The concept of highest and best use indicates that market value of vacant land depends on what?

The concept of highest and best use is foundational in real estate appraisal, particularly when determining the market value of vacant land. This principle asserts that the value of a property is maximized when it is used in a way that is legally permissible, physically possible, financially feasible, and maximally productive. Therefore, assessing the potential use of vacant land is crucial for establishing its market value.

Potential use takes into account what the land could be developed into, considering zoning laws, land characteristics, and market demand. This aspect is essential as it allows appraisers to compare the current market conditions and determine what the land could yield in terms of its optimal use, rather than just its current state or historical uses. In many cases, vacant land may not have any immediate use, but its value lies in its potential for development or transformation based on market dynamics.

Current use often does not reflect the best economic use of the property, especially if it is underutilized or misused compared to what is permissible under zoning regulations. Past sales can provide historical context and insight into market trends, but they do not focus on future development opportunities. Improvement costs are relevant for understanding the expenses associated with bringing the land to its highest and best use, but they do not directly determine the