The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Alternatively, the probable use of land or improved property – specific with respect to the user and timing of the use – that is adequately supported and results in the highest present value.
An example might be an industrially-used site that can now be used legally for high-rise residential buildings, but would cost so much to clean up (remediate) that the value as currently used is higher.
Further, the highest and best use of a property can be a class of uses (such as retail or multi family), rather than a specific use (i.e. development of a fast food restaurant).
This may exclude uses that are not, and unlikely to become, permitted by zoning, land use planning, uses forbidden by government regulations, and uses prohibited by deed restrictions or covenants.
For example, a 40,000-square-foot (3,700 m2) single story warehouse would not fit on a 10,000-square-foot (930 m2) site; therefore, that use would fail the physical possibility test.
In the case of an improved property, with obvious remaining economic life, the question of financial feasibility is somewhat irrelevant.
James Graaskamp fully developed a model that reflects this reality more clearly, and termed it most probable use.
According to an article prepared by an entity working with the US Fish and Wildlife Service, which was posted on the United States Fish and Wildlife Service website: “These (HBUs) are defined as lands which have higher values for their non-timber amenities such as for recreation and conservation.”[4] Organizations such as the American Society of Farm Managers and Rural Appraisers (ASFMRA), the American Society of Appraisers (ASA) and the Appraisal Institute have issued guidance to their members stating that the use of non-economic valuation concepts such as the above must not be used in connection with concepts such as Market Value and Highest and Best Use when engaging in typical appraisal assignments.
However, proponents of alternate valuation metrics point out that valuing land through a purely economic perspective often fails to capture important benefits to the public such as clean water, pleasing scenery, erosion control, and recreation.
Public Interest Value”[5]"”[6]" is potentially the most well known alternate valuation concept and has been discussed by many authors and specifically addressed in the Uniform Standards for Federal Land Acquisition (UASFLA)”[7]".
In appraisals, an entity is assessed at its highest or best use to maximize value and increase revenue.