What does the term "highest and best use" mean in appraisal?

The term "highest and best use" refers to the most profitable and optimal use of a property that meets specific criteria. This concept is crucial in appraisal because it helps determine the value of a property based on its potential uses.

The correct answer emphasizes that the highest and best use must be legally permissible, meaning it complies with zoning regulations and laws; physically possible, indicating that the property can physically accommodate the use; and financially feasible, suggesting that the use will provide a reasonable return on investment. This comprehensive approach ensures that the property is evaluated holistically, considering all constraints and opportunities.

In contrast, other choices present limited or incorrect perspectives. For example, the least income generating use does not align with the concept of maximizing property value. A temporary use does not fully capture the essence of highest and best use, which should be a long-term and stable utilization of the property. Lastly, focusing solely on the historical use overlooks potential changes in market demand and new developments, which could lead to a more profitable or appropriate use of the property. Thus, the correct option encapsulates the multifaceted assessment required to identify the highest and best use properly.