What are the four tests an appraiser must make in the analysis of the highest and best use?

When analyzing the highest and best use of a property, appraisers must evaluate it through four specific tests: legally permissible, physically possible, financially feasible, and most productive.

Legally permissible refers to what is allowed under current zoning laws and regulations. For example, a property might be located in a residential area, which would restrict its use to residential purposes only.

Physically possible examines the actual characteristics of the property itself, such as its size, shape, and accessibility. This helps determine what can be built or what type of use can be supported given the physical constraints of the property.

Financially feasible assesses whether the potential use can generate enough income or value to justify the investment costs. This involves market analysis to ensure there is sufficient demand for the proposed use.

Most productive focuses on choosing the use that will yield the highest net return over time. This test involves determining which possible use scenario maximizes the value of the property to its owner.

By applying these four tests, appraisers can arrive at the highest and best use conclusion that can guide effective property valuation and investment decisions.