Highest and Best Use
The legally permissible, physically possible, financially feasible, and maximally productive use of a property, used as the basis for appraised value.
Highest and best use is the use of a property that is legally permissible, physically possible, financially feasible, and maximally productive. Appraisers determine it first, because value is estimated based on that use rather than the current use.
A property's current use is not always its highest and best use. A small house on a commercially zoned lot may be worth more for redevelopment than as a residence.
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- Market Value
The most probable price a property should bring in a competitive and open market under fair conditions with informed, willing parties.
- Sales Comparison Approach
An appraisal method that estimates value by comparing the subject to recent sales of similar properties and adjusting the comparables toward the subject.
- Cost Approach
An appraisal method that adds land value to the depreciated cost to replace the improvements. It fits new or special-purpose buildings.
This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.