• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

ADU or not ADU, that is the question

Looks like an ADU to me. In my area of coverage, ADU's can only be occupied by a member of the homeowner's family. An ADU cannot be rented out to the public as the zoning often allows for single family, but not 2-unit (duplexes). I would call your lender to delay the due date, check the zoning to see if it is allowed and what are the requirements if it is allowed, and see if it was a permitted improvement.
 
"The converted area is also internally connected to the remainder of the dwelling through a shared laundry room containing a shared half bath"

Not an ADU to me.
 
Fannie Mae qualifications assume that what they want is legal.
No they don't assume that the property is legal....Fannie has been accepting properties with illegal ADU's for as long as I can remember (at least 20 years)i if the appraisal includes 2 similar comps with an illegal ADU (used to 3 comps with an illegal ADU until about 8 or 10 years ago):

B2-3-04, Special Property Eligibility Considerations​

Zoning for an ADU

Some ADUs may predate the adoption of the local zoning ordinance and therefore be classified as legal nonconforming. An ADU should always be considered legal if it is allowed under the current zoning code for the subject property.

If it is determined that the property contains an ADU that is not allowed under zoning (where an ADU is not allowed under any circumstance), the property is eligible under the following additional conditions:

​

B4-1.3-05, Improvements Section of the Appraisal Report​

Zoning for an ADU
If it is determined that the property contains an ADU that is not allowed under zoning (where an ADU is not allowed under any circumstance), the property is eligible under the following additional conditions:
  • The lender confirms that the existence will not jeopardize any future property insurance claim that might need to be filed for the property.
  • The illegal use conforms to the subject neighborhood and to the market.
  • The property is appraised based upon its current use.
  • The appraisal report states that the improvements represent a use that does not comply with zoning (“illegal” use).
  • The appraisal report demonstrates that the improvements are typical for the market through an analysis of at least two comparable sales with the same non-compliant zoning use. Aged settled sale(s) with the same non-compliant zoning use are acceptable if recent sales are not available. At a minimum, the appraisal report must include a total of three settled sales.
 
Each locality has different rules for ADU.
In CA, ADUs are encouraged.
 
Each locality has different rules for ADU.
In CA, ADUs are encouraged.
I used to appraise in in an area where properties had ADU's that were clearly illegal under the applicable zoning code, but these ADU's were openly rented and the properties with the ADU's opening market and sold without any interference or enforcement whatsoever from the municipality. Thus while these ADU's were technically illegal under the zoning code, the reality was that for all practical purposes they were constructively legal and they were quite valuable as rents in the area were very high and the property owners were collecting a large amount of rent from these units.
 
It seems the 'legality' varies from region to region... even within the same state. In this case, the least 'ADU', it would be fancy garage and SFR... or unpermitted living space enhancing the value as SFR... or if City Fathers are more accepting, ADU separate line item GLA plus SFR separate GLA. Due to one meter electric, gas etc, it doesn't reach duplex status which may/may not be permitted dependent on the zoning. As GWISC noted above, local laws may supercede what we would assume the use would/could/should be.

In SoCal, the laws are changing so rapidly in areas of dense population, that when I went to do an appraisal on a SFR with detached garage last week, I found the detached garage was newly finished & permitted as ADU, they had built a back house (maybe previously 2-on-a-lot), then carved off a chunk of the main house into an efficiency apartment! Some of the new legislation requires the owners/converters to reside on the property for 3 years to get the permits. ...but after that?.... The research for comps was brutal, because here the Realtors keep too many secrets and don't disclose relevant stuff like square footage and rents, and it was a miserable task. Ended up putting this zoned SFR (4-units) on a 1025 Units form.
 
I used to appraise in in an area where properties had ADU's that were clearly illegal under the applicable zoning code, but these ADU's were openly rented and the properties with the ADU's opening market and sold without any interference or enforcement whatsoever from the municipality. Thus while these ADU's were technically illegal under the zoning code, the reality was that for all practical purposes they were constructively legal and they were quite valuable as rents in the area were very high and the property owners were collecting a large amount of rent from these units.
Even most ADUs are under rent control in SF. Before it was hypocritical for SF to call them illegal units and yet still under rent control.
 
It seems the 'legality' varies from region to region... even within the same state. In this case, the least 'ADU', it would be fancy garage and SFR... or unpermitted living space enhancing the value as SFR... or if City Fathers are more accepting, ADU separate line item GLA plus SFR separate GLA. Due to one meter electric, gas etc, it doesn't reach duplex status which may/may not be permitted dependent on the zoning. As GWISC noted above, local laws may supercede what we would assume the use would/could/should be.

In SoCal, the laws are changing so rapidly in areas of dense population, that when I went to do an appraisal on a SFR with detached garage last week, I found the detached garage was newly finished & permitted as ADU, they had built a back house (maybe previously 2-on-a-lot), then carved off a chunk of the main house into an efficiency apartment! Some of the new legislation requires the owners/converters to reside on the property for 3 years to get the permits. ...but after that?.... The research for comps was brutal, because here the Realtors keep too many secrets and don't disclose relevant stuff like square footage and rents, and it was a miserable task. Ended up putting this zoned SFR (4-units) on a 1025 Units form.
Sounds like a mess to appraise...hope you are getting a nice fee for that one.
 
Sounds like a mess to appraise...hope you are getting a nice fee for that one.
The NEW TWIST is that Realtors are frequently now removing all the interior photos from MLS once they get an accepted offer, which creates a devil of a conundrum when evaluating condition and upgrades of the comparables when writing an appraisal report.
 
Most states do not have their own statewide legal definition of “ADU.”

The usual pattern is the opposite of California’s.

How it actually works​

There is no federal definition of an accessory dwelling unit. The phrase is planning jargon that localities and a minority of states have written into law.

As of 2026, roughly 18–20 states have a statewide ADU statute that requires (or strongly encourages) cities to allow them. Those statutes almost always include a definition. Examples: California, Oregon, Washington, Massachusetts, New Hampshire, Arizona, Colorado, Maine, Montana, Vermont.

The other 30-plus states — including Tennessee, Texas, Florida, Georgia, Illinois, Pennsylvania, and most of the South and Midwest — leave ADUs to city and county zoning. There is no state definition. Each locality that wants the concept writes its own, or never uses the term at all and instead regulates “guest houses,” “garage apartments,” “accessory apartments,” or “second dwelling units.”

So it is not “each state has its own definition.” It is:

  • a minority of states define the term in statute and preempt local bans;
  • most states have no state definition;
  • thousands of cities and counties each have (or lack) their own.

The definitions that do exist are close​

Where a definition exists, it is usually the same functional idea:

a second dwelling on the same lot as a principal house, with its own sleeping, cooking, and sanitation.

California is unusual in also creating a separate statutory category (JADU) and in how tightly the state definition binds every city. New Hampshire’s statute, for example, is closer to the common core: a living unit on a lot with a single-family dwelling that has independent sleeping, eating, cooking, and sanitation. Nashville’s local “DADU” definition adds extra tests (must be detached and subordinate in size/height/purpose) that California’s state definition does not require.

Bottom line​

“ADU” is a shared planning term, not a uniform legal term. California is on the high-definition, high-preemption end. Tennessee is on the local-control end. Most states look more like Tennessee than California.
 
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Back
Top