What is meant by the term "highest and best use" in property valuation?

The term "highest and best use" in property valuation refers to the most profitable legal use of a property that is physically possible, appropriately supported, and financially feasible, which leads to its highest market value. This concept emphasizes that the value of a property is greatly influenced by how it is utilized.

The correct answer identifies that the use must be legal and supported by market conditions to ensure that it can maximize the property's value. In real estate valuation, determining the highest and best use involves analyzing the potential uses of a property to find the one that will yield the greatest return or benefit, while still adhering to zoning laws and regulations.

The other options attempt to define the term but do not capture the full essence of what "highest and best use" entails. For example, while maximizing rental income may be one potential outcome, it is not the only factor to consider. The explanation emphasizes the need for legality and market support, which are critical components in determining the true highest and best use.