Applying the Principle of Consistent Use

Shenehon Company is pleased to announce that the International Right of Way Association will publish an article by John T. Schmick in the May/June 2010 issue of Right of Way.

John reviews what happens to value when the principle of Consistent Use is applied incorrectly. The basic concept is that land and improvements must be valued on the same basis. Once the highest and best use (HBU) of land as vacant is established, the principle of consistent use requires that the improvement be valued on that same basis. Inappropriate application of this principle leads to appraisal errors that may invalidate the opinion being offered. Two common errors are discussed in the article.

The first is the use of a building residual methodology to create a hybrid property value where the building component is valued on one basis and the land component is valued on another basis. The resulting hybrid value is inaccurate and not supported by market data. Another common error is an inappropriate application of the consistent use principle so as to subrogate highest and best use requirements. This second type of error is a violation of the Uniform Standards of Professional Appraisal Practice.

Application errors involving the concept of consistent use often surface when the appraiser encounters a property where the improvement is near the end of its economic life and may be an interim use. Another tricky area is when the property is in an area which is transitioning from one type of use to another. A link to the article will be forthcoming.

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