The Manila Board of Realtors (MBR) in its Annual Membership Meeting invited Appraiser Consultant Gus Agosto to discuss the highest and best use analysis. It was designed to provide members a brief view on the concept and purpose of highest and best use in the appraisal and development process. The meeting was held on October 7,2020 via zoom webinar.
Paying attention to the highest and best use will better the appraisal and consulting profession as a whole, and help practitioners in their transactions and for the appraisers to improve reports.
Appraiser Agosto, who is also a consultant of the Asian Development Bank, emphasizes the importance of the highest and best use analysis in providing different options and market value estimates for the same property. He provided an example from a listing of a real estate practitioner which marketed the property as a 4-storey apartment for Php 41 Million. However, the same property can be marketed as a potential 10-storey apartment and can be sold for Php 63.2 Million. Also, it can be marketed as a Serviced Apartment and can be sold to investors at Php 84 Million.
Highest and best use is extremely important in appraisal reporting because the market value estimate depends entirely on the nature of the present or anticipated use for it according to the concept of surplus productivity. It determine the selection of comparable sales and ultimately determine the market value estimate.
“Highest and best use is not only important but a must in the value consulting process”, the consultant concluded.