Accessory Units/FHA Appraisals

[raleighncapp]

Hi everyone! I'm trying to determine if an area on the second level of a property I'm appraising for FHA is considered to be an accessory unit. It's a little complicated, so hopefully I'll explain it OK...

The home is a two-story house. When it was constructed in 2006, only part of the second level was completed (a guest bedroom and a guest bathroom). A few years ago the homeowner's daughter decided to move back home, so they completed the remainder of the second level and added a recreation room, bedroom, and a kitchen. Of course, they didn't get the proper permits for these additions. So now I have a home with a non-permitted area which contains a kitchen.

I know that I'll need to separate the non-permitted area in the report and not include it in the GLA. Would this "new" area be considered an accessory unit since it contains a kitchen? It's my understanding that accessory units are supposed to contain a bathroom...there is a bathroom on the same floor as this non permitted area, but it's not a part of the non-permitted area. Also, the only way to access the kitchen is through the bedroom, and the only way to access this non-permitted area is through the actual home, so the home wouldn't be considered to be multi family or a duplex. Any thoughts would be greatly appreciated....this is a new one for me!

 

[J Grant]

An ADU typically has a separate access from main home ( which this does not), and the kitchen one hopes for an ADU is a legal permitted kitchen

I don't think what you describe sounds like an ADU.

It sounds like a second story where half of it was construction that never received a permit and owner put in a second kitchen up there. FHA accepts non permitted areas as contributing to value with similar comps ( 2) or may accept non permitted sf as living GLA depending on quality etc... ( see if you can find it in FHA 4000.1 handbook ) I can't recall what FHA says about a non permitted second kitchen ...

 

[GA Benny]

Without the separate entrance and the clear functional obsolescence, I would probably not recognize this area as an ADU. Although the functional issues may be curable, I don't know. Think about potential buyers and how they may react. For those specifically targeting a separate unit, this would not likely meet their needs. There may be a small market segment that would appreciate it, but perhaps not pay a significant premium for it. At the very least I would probably consider a significantly diminished value contribution.

 

[Non Sequitur]

IMO it's and ADU, permitting is a separate issue. Per FHA handbook:

Identifying an Accessory Dwelling Unit

(1) Definition

An Accessory Dwelling Unit (ADU) refers to a habitable living unit added to, created within, or detached from a primary one-unit Single Family dwelling, which together constitute a single interest in real estate. It is a separate additional living unit, including kitchen, sleeping, and bathroom facilities.

(2) Required Analysis and Reporting

As part of the highest and best use analysis, the Appraiser must make the determination to classify the Property as a Single Family dwelling with an ADU, or a two-family dwelling. The conclusion of the highest and best use analysis will then determine the classification of the Property and the analysis and reporting required.

An ADU is usually subordinate in size, location and appearance to the primary Dwelling Unit and may or may not have separately metered utilities or separate means of ingress or egress. The Appraiser must not include the living area of the ADU in the calculation of the Gross Living Area (GLA) of the primary dwelling.

The Appraiser must notify the Mortgagee of the deficiency in MPR or MPS if more than one ADU is located on the subject Property.