In our practice of valuing, advising and marketing golf course properties the question of highest and best use is often prominent.
The Real Estate Appraisal Dictionary (7th Edition) defines highest and best use as:
“The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are:
- legal permissibility;
- physical possibility;
- financial feasibility;
- maximum productivity.”
Over my 40+ years in the golf course space, I’ve often heard it said that the highest and best use of a golf course is “usually for development.” While sometimes that’s the case, and golf courses aren’t always the most efficient use of land, it’s not always true.
While in many cases, golf properties are situated on land zoned for alternative uses, such as residential subdivision, just because it can be developed, doesn’t mean it is likely to be developed. Since the “tests” mentioned above are sequential, and a property has to meet all of them, I’ve observed that many golf course properties meet the first two tests for an alternative use but often not the test for being financially feasible, or maximally productive, for a variety of reasons.
Sometimes the property exhibits physical characteristics such as terrain or distance from utilities that make it not feasible. Other reasons may simply include the supply-demand balance or projected growth in the market for housing or the climate for development in the area, with the political landscape being an obstacle. The time required and costs to be incurred in getting entitlements along with how long it will take for the proposed development to be absorbed into the market are primary considerations as to whether an alternative use development project is feasible.
Since it’s often underperforming golf courses and clubs that are targeted for development, another highest and best use consideration is whether the golf course in question is properly positioned in the market. I’ve observed private clubs that should’ve been daily-fee and vice versa. Sometimes, this is the reason golf courses are considered for alternative uses.
While a credible determination of highest and best use, and subsequent estimate of market value is reliant on the four tests, one consideration that is not often acknowledged is who owns the property. While this may not seem significant, it most certainly can be.
Seemingly “buried” right in the beginning of the definition of highest and best use is the phrase “The reasonably probable use”.
There were roughly 16,000± golf courses in the United States, according to the National Golf Foundation at the end of 2025. Of those, roughly 4,500± are private clubs and roughly 3,000± are municipal courses. If 3,000 (est.) of the private clubs are member-owned, those and all the municipal courses could have an impact on highest and best use from ownership.
That means that for roughly 6,000± golf courses (37.5%), the “reasonable probability” of the course being converted to an alternative use could be quite low. Private clubs often have a variety of provisions in their bylaws hindering or preventing sale of the property for an alternative use. Some require a supermajority of members to vote in favor while others dictate that the proceeds of any sale would go to another similarly intended not-for-profit organization. These are often high hurdles to overcome. Most sales of private, member-owned clubs that I’ve observed have been for-profit operators who have preserved the club.
Municipal courses have similar dynamics in that unless financially draining and/or politically unpopular, many municipalities seek to preserve their golf courses as a recreational amenity for residents and if possible as a profitable enterprise to assist with annual budgeting. It’s common for communities to seek to provide such amenity, even if it is unprofitable. The politics of selling the golf course can meet with community resistance.
This not only impacts how a property might be appraised in situations where a tax assessment is contested, an eminent domain (condemnation) action is being resolved or any other dispute resolution, but also in advisory situations or when marketing a property for sale.
Certainly, every property owner wants to maximize proceeds from a sale, and it is not at all unusual for sellers to try to market their golf courses as potential development sites as a way to enhance value and sale price. However, being unrealistic about price expectations, sometimes because of an inaccurate perception of highest and best use can result in an extended marketing period which diminishes a property’s value.
Thus, we revert to the question of whether it matters who owns a golf course impacts the determination of highest and best use. We have been involved in ad-valorem tax assessment cases where 100+ year old, private clubs with stable memberships were assessed on the basis of an alternative use of the land. The question had to be asked as to whether any alternative use was “reasonable and probable.” Even if the property could be developed, physically and legally, IMHO it is neither reasonable nor probable in many of these cases.
