Newz: Hidden AMC fees, Appraisal Subcommitee Cutbacks, Highest and Best Use
July 11, 2025
What’s in This Newsletter (In Order, Scroll Down)
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- LIA AD: Borrower Wants Answers Appraiser Can’t Give
- What is Highest and Best Use in Appraisal? Appraisal
- By Kevin Hecht
- Purple Rain! Vibrant Violet Villa That Would Make Prince Proud for $3,499,000
- Could a Class Action Lawsuit Finally Unbundle Hidden AMC Fees? by Isaac Peck, Publisher WorkingRe
- The AMC Industry Won’t Be Toppled by Code
- Appraisal Oversight (ASC) Subcommittee Faces Cuts Amid Leadership Turmoil
- Mortgage applications increased 9.4 percent from one week earlier
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What is Highest and Best Use in Appraisal?
By Kevin Hecht
Excerpts: When determining property value, one of the most critical concepts in real estate appraisal is highest and best use (HBU). Professional standards require appraisers to develop an opinion of HBU when necessary for credible assignment results. HBU refers to how a property should be used to generate maximum value under specific constraints, not necessarily how it’s currently being used.
Definition of Highest and Best Use
In professional appraisal practice, Highest and Best Use is defined as “the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value” (Appraisal Institute, The Dictionary of Real Estate Appraisal, 2022). This definition emphasizes that HBU must be reasonably probable, not merely possible or speculative.
Appraisers must analyze the property as vacant land, and as improved, considering what is legally permissible, physically possible, financially feasible, and maximally productive in the current market.
Why Highest and Best Use in Appraisal Matters
Highest and Best Use gives stakeholders insight into a property’s worth at its full potential. It guides market value determinations that reflect the property’s full potential and informs development and investment decisions based on feasibility and profitability. Additionally, HBU supports lending and underwriting decisions, especially for construction loans or redevelopment projects, guiding land use planning and zoning analysis in transitioning neighborhoods.
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My comments: Well written and understandable. I was trained at an assessor’s office to first determine highest and best use for each property I appraised. For homes, issues I have had were a small house on a large lot where nearby lots were being converted to apartments. More common for homes is a possible lot split. HBU is a regular factor for appraising commercial properties in my city. The main part of the city was almost fully developed by the early 1940s. Often the HBU was not the current use.