Certified Relocation Professional (CRP) Practice Exam

When an appraisal report is prepared for a residential property that can be subdivided, what does it focus on?

1. The anticipated added value of the subdivision

2. The income approach analysis

3. The present use of the property

4. The highest and best use of the land

The correct answer is: The present use of the property

In the context of appraising a residential property that has the potential to be subdivided, the focus of the appraisal report generally emphasizes the highest and best use of the land. This principle is aimed at determining how the property can be utilized most effectively to maximize its potential value. When assessing properties that can be subdivided, appraisers analyze various factors to establish what configuration or use would yield the greatest returns, considering development possibilities. This approach includes evaluating current zoning regulations, market demand for different property types, and the physical characteristics of the land. The greatest value of the property is often achieved through subdivision, which looks beyond the current use to envision more profitable potential uses. While the present use of the property is a crucial component of the overall appraisal, focusing solely on it may overlook more lucrative options available through subdivision and redevelopment. The appraisal should consider how the property, if subdivided, may not only enhance its value but also meet the broader demands of the area in terms of housing needs or commercial opportunities. Consequently, understanding the concept of "highest and best use" is essential in the appraisal process for subdividable properties, guiding the appraiser in making informed decisions about the valuation and the future potential of the land.