Reconsidering the Definition of Highest and Best Use: The Case for a Post-Disaster Highest and Best Use

  • June 17, 2010
  • • Written by: Donald R. Epley, Ph.D. CCIM, MAI

Summer 2010, Vol. 35, No. 2

Abstract: Orderly development and ownership of real property following a disaster depends critically on the estimation of the highest and best use and real property value. It is the number used in the payment of insurance loss claims, possible sale, construction of improvements, and financing. The typical market concept and definition of highest and best use commonly used in a market economy is neither structured nor applicable in a situation where the marketplace has been severely impacted, and perhaps destroyed, by a catastrophe. The presumptions underlying market value and the approaches to value do not exist. In this article, the author reviews the deficiencies and suggests that a new disaster highest and best use be adopted. His recommendations include surveying a select group of informed individuals to estimate the value of the existing site “as is.”