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Can a Property Change its Highest and Best Use?

by Administrator on Apr 3, 2014 Market Conditions Articles 1772 Views

It happens all the time, especially in markets like Las Vegas that have suffered significant price decreases.  There were many properties that in 2007 had a much higher value as vacant land but in 2014 their improved value is now higher than their land value.  Their highest and best use changed with market changes over time.

When market demand for land increases again, and land prices correspondingly increase, the opposite situation occurs and some existing home improvements will become less valuable than their sites (as if vacant).  So the highest and best use of properties can change when demand changes in the real property market.

Land use planning and zoning changes can have a similar effect.  When a property falls within a restricted area, like one with low density residential zoning, and changes occur that free a property for a higher intensity use, a change in the highest and best use can also occur.

Builders often change the highest and best use of properties during their development process through the same mentioned planning or zoning changes via the master planning of communities.

There are also some properties that have been deed restricted and what would have been their highest and best use without the restriction can become their actual highest and best use with the removal of the deed restriction.  If for example a property that was best suited to development for a high rise condominium project but a deed restriction limited it to its existing three stories, the removal of the deed restriction would changes its highest and best use.

Existing improvements often remain on properties beyond the time when they are no longer their highest and best use.  An acre of land with a value of a million dollars, which increased in value due to changes over time can be found to be encumbered by a home worth half that amount.  The highest and best use of the land changed, but the "sub-economic" residential use of the property remains.

If appropriately analyzed, an appraiser will recognize the highest and best use of a property during the data analysis portion of their appraisal process.  A property can appear to have one highest and best use on the date of the appraisal, or in its current state, but actually have another. Appraisers consider the value of an appraised property “as vacant” and “as improved” to determine highest and best use.  If the value of a property is higher “as vacant” then the improvements, as much as they may look appealing, are not the highest and best use.

So the answer to the question "can a property change its highest and best use?" is yes.  The change can happen on its own due to changing market forces, it can happen due to changes with deed restrictions and it can happen with changes in zoning and planning.

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at

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