Origination ActivitiesQuestion 258 of 400
An appraisal report notes the subject property's highest and best use differs from its current use. Why does 'highest and best use' matter in valuation?
a.It sets the interest rate
b.It determines the borrower's credit score
c.It fixes the loan term
d.It reflects the legally permissible, physically possible, and financially feasible use that supports maximum value
Explanation
Highest and best use is the reasonably probable use of a property that is legally permissible, physically possible, financially feasible, and maximally productive, and it underpins the appraiser's value conclusion. It does not set rates, credit scores, or loan terms.
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