SAEE Core Valuation Principles 3 — Questions and Answers
Question 1: Highest and best use must satisfy all of the following EXCEPT being:
- The most personally preferred by the owner (Correct answer)
- Legally permissible
- Physically possible
- Financially feasible
Correct answer: The most personally preferred by the owner
Highest and best use is the legally permissible, physically possible, financially feasible, and maximally productive use—not personal preference.
Question 2: Which of the four tests of highest and best use is typically applied LAST?
- Maximum productivity (Correct answer)
- Legal permissibility
- Physical possibility
- Financial feasibility
Correct answer: Maximum productivity
After screening for legality, possibility, and feasibility, the use yielding maximum productivity is selected.
Question 3: Highest and best use analysis is usually performed on which basis first?
- As if the land were vacant (Correct answer)
- As currently improved only
- Based on owner intent
- Based on the loan amount
Correct answer: As if the land were vacant
Appraisers typically analyze highest and best use of the land as though vacant, then as improved.
Question 4: A zoning change that permits commercial use on residential land most directly affects which test of highest and best use?
- Legal permissibility (Correct answer)
- Physical possibility
- Financial feasibility
- Maximum productivity
Correct answer: Legal permissibility
Zoning governs what uses are legally permitted on a site.
Question 5: If a current improvement no longer represents the highest and best use, its value is best described as suffering from:
- Functional or external obsolescence reducing contribution (Correct answer)
- Increased replacement cost
- Higher land value only
- Physical appreciation
Correct answer: Functional or external obsolescence reducing contribution
An improvement that is not the highest and best use contributes less value and may show obsolescence.
Question 6: Soil that cannot support a high-rise foundation primarily limits which test?
- Physical possibility (Correct answer)
- Legal permissibility
- Financial feasibility
- Maximum productivity
Correct answer: Physical possibility
Site characteristics like soil and dimensions determine what is physically possible.
Question 7: A proposed use that is legal and possible but cannot generate adequate return fails which test?
- Financial feasibility (Correct answer)
- Legal permissibility
- Physical possibility
- Conformity
Correct answer: Financial feasibility
Financial feasibility requires that a use produce sufficient return to justify it.
SAEE Core Valuation Principles 3
Highest and best use must satisfy all of the following EXCEPT being: