ADU Comparable

[J Grant]

There is some value. You can call it a semifinished storage area which has some value.
In most cases, ADUs have value because most people like additional rent income even the rich (Yes, some rich people like to have additional income).
Few like me want an ADU in my house because I value my privacy and don't need the additional rent.

In my area, ADU's are not typically rented out ( though they can be )

They typically add value as a home office, guest house, art studio etc. A few end up used for storage but most often I see an extended family member living there.

 

[Fernando]

In my area, ADU's are not typically rented out ( though they can be )

They typically add value as a home office, guest house, art studio etc. A few end up used for storage but most often I see an extended family member living there.

Yes it depends on area.
Where I live, past years purchases, I noticed these owners renting out ADUs (more dense street parking).
I would think if someone can afford $1.5+ million homes, they can afford the mortgage payments.

 

[Tim Hicks (Texas)]

If ADUs are rented, the typical lender would like to know if they are separately metered.

 

[glenn walker]

This thread was easy but went off the rails

 

[sputnam]

So do you amend the address, legal description, assessor parcel number, annual taxes, etc., to reflect that the ADU is excluded (assuming a jurisdiction where the land and attachments are real property)?

No. The property is the bundle of rights. Your appraisal is your supported opinion of the value of the bundle of rights that is the subject of your appraisal. That can be the entire property or a portion of the property. We appraise land. We only appraise improvements because they are permanently attached to the land. We appraise permanent improvements because they are legally considered real property rather than personal property. The street address, legal description, parcel number don't change because you are not including the ADU in the valuation. The annual taxes are a statement of fact... based on how the county assesses the property. With all those items, the appraiser is merely reporting the results of public records research.

What you do is add commentary. Clearly stating that the partially completed ADU has not been included in the bundle of rights you have appraised and explaining why.

 

[J Grant]

No. The property is the bundle of rights. Your appraisal is your supported opinion of the value of the bundle of rights that is the subject of your appraisal. That can be the entire property or a portion of the property. We appraise land. We only appraise improvements because they are permanently attached to the land. We appraise permanent improvements because they are legally considered real property rather than personal property. The street address, legal description, parcel number don't change because you are not including the ADU in the valuation. The annual taxes are a statement of fact... based on how the county assesses the property. With all those items, the appraiser is merely reporting the results of public records research.

What you do is add commentary. Clearly stating that the partially completed ADU has not been included in the bundle of rights you have appraised and explaining why.

You do not address the issue that if we want to appraise a portion of the property and exclude a portion that exists ( a pool, an ADU, an acre, etc) then we need to make it subject to a HC, because clearly , the pool or ADU or extra acre exists, and we are choosing to exclude it as if it does not exist as an assignment condition.

The reason it is not an acceptable assignment condition for a URAR is there are no additional HC 's allowed to be made, because the form is designed to be either as-is or subject to. You can't disclaim not making an HC by disclosing the ADU exists or by saying the client asked for it as an assignment condition.

Or to put it another way, an appraiser might do it and get away with it, which works fine until the day there is a forensic review or a party says the report is misleading.

 

[CGinMN]

Not a USPAP expert like sputnam or ale, but IMO the OP needs to clarify from the client what it is that they actually are looking for, and then determine for certain whether or not this is an in-house loan, or if it will be sold on the secondary market. Also, I think knowing more about the ADU, its location on the site, and where it is positioned relative to the other improvements will dictate whether this could be appraised as a physical segment without the use of an HC. If it is located above the garage or in the basement, I guess I do not see how it can be done without the use of a HC. If it is detached, but located 10 feet from the home, does the physical presence of the ADU impact the functional utility of the property to be appraised? If it is detached and located 500 feet away with separate access maybe the property can be appraised as a physical segment with consideration of the ADU.

Personally, I would use quite a bit of caution in an assignment like this.

 

[J Grant]

Not a USPAP expert like sputnam or ale, but IMO the OP needs to clarify from the client what it is that they actually are looking for, and then determine for certain whether or not this is an in-house loan, or if it will be sold on the secondary market. Also, I think knowing more about the ADU, its location on the site, and where it is positioned relative to the other improvements will dictate whether this could be appraised as a physical segment without the use of an HC. If it is located above the garage or in the basement, I guess I do not see how it can be done without the use of a HC. If it is detached, but located 10 feet from the home, does the physical presence of the ADU impact the functional utility of the property to be appraised? If it is detached and located 500 feet away with separate access maybe the property can be appraised as a physical segment with consideration of the ADU.

Personally, I would use quite a bit of caution in an assignment like this.

I don't understand this line of reasoning at all. USPAP does not address ADU's but USPAP says not to be misleading, and an HC means contrary to what exists.

Whether an ADU is 10 feet or fifty feet or attached to the main dwelling, why would that affect a decision to use an HC ? The ADU exists, we are appraising the property with excluding the ADU for valuation purposes, and that creates the HC.

I also don't understand why an in house or private loan vs a lending loan would influence whether to make an HC or not. The HC addresses a physical part of the property, which does not change according to a loan type.

 

[CGinMN]

Read up on appraising physical segments and FAQ 197.

Edit: 195 and 196 too.

 

[sputnam]

You do not address the issue that if we want to appraise a portion of the property and exclude a portion that exists ( a pool, an ADU, an acre, etc) then we need to make it subject to a HC, because clearly , the pool or ADU or extra acre exists, and we are choosing to exclude it as if it does not exist as an assignment condition.

The reason it is not an acceptable assignment condition for a URAR is there are no additional HC 's allowed to be made, because the form is designed to be either as-is or subject to. You can't disclaim not making an HC by disclosing the ADU exists or by saying the client asked for it as an assignment condition.

Or to put it another way, an appraiser might do it and get away with it, which works fine until the day there is a forensic review or a party says the report is misleading.

An HC is not required for appraising a physical segment. It's not prohibited either. What is required in your report is clarity about which property is being included in the valuation. FAQs 195, 196, and 197 are applicable.