What adds the most value to land and the improvements?

• A. Market demand
• B. When the property is used for its highest and best use
• C. Location
• D. Size

Answer: (B)

The value added by land and improvements comes from using them in their highest and best use. This means the use that is legally permissible, physically feasible, financially feasible, and yields the greatest net return given current market conditions. When a property is analyzed this way, you assume it’s employed in that use because that scenario would command the most value in the market.

Market demand, location, and size matter, but they influence which use is the most profitable and feasible. They don’t override the idea that the property should be valued based on its best potential use. If you align the land and improvements with the use that the market values most highly, you unlock the maximum value they can produce.