Several weeks ago I focused on the use of comparative market analysis to determine the value of a property.
I referenced a client who purchased a property, subdivided it, and was able to resell the land at a significant profit.
Identifying such potential requires a determination of a property’s highest and best use, a concept in real estate often overlooked.
The highest and best use of a property accounts for the most profitable use of land. In evaluating reasonably probable and adequately supported alternatives, one must focus on four factors — uses that are legally permissible, physically possible, financially feasible, and maximize productivity.
The existing use of a property may or may not be the highest and best use. In fact, few properties are developed to their potential.
To ensure you are maximizing your profit, or to avoid overpaying for a property, you should consider retaining the services of a real estate appraiser. A member of the Nova Scotia Real Estate Appraisers Association will make sure you get a fair deal by determining the market value of the property and making recommendations about alternate uses.
Many people have successfully looked beyond the highest and best use by considering uses that are not legally permissible. We regularly see projects that are based on development agreements with the municipality.
A contract development, which would be specific to an individual property, could allow for a use that would otherwise be prohibited. For example, we recently worked on a development agreement that permitted twelve residential units in an area where the zoning called for two-unit dwellings.
For those who are ambitious and patient, the highest and best use can change drastically if the legally permissible use is successfully changed.
– Elias Metlej is a real estate lawyer with the Halifax firm Blois Nickerson & Bryson. You can write to Elias at email@example.com