Basement ADU?

[NJ Valuator]

I would appreciate some feedback on how other appraisers would handle the following situation.

The subject has a finished basement with the physical characteristics and potential utility of an ADU. It contains independent space for living, sleeping, cooking, and bathroom facilities and can be accessed without passing through the primary living area. However, it is not currently being utilized as an ADU.

My first question is: Would you identify this as an ADU based on its configuration and independent living facilities even though it is not currently being utilized as one, or would you simply describe it as a finished basement with the potential to function as an ADU?

My follow-up question concerns how the square footage should be handled if it is identified as an ADU.

Fannie Mae states:

“When reporting the living area of an ADU, it should not be included with the finished above-grade square footage calculation of the primary dwelling. It should be reported and adjusted for on a separate line in the grid, unless the ADU is contained within or part of the primary dwelling with interior access and above grade.”

The issue I see is that this guidance specifically addresses above-grade living area, while in this situation the entire ADU configuration is within the basement.

My inclination would be to continue reporting the entire finished area within the applicable below-grade/basement line of the sales comparison grid (after all, the basement is contained within the primary dwelling) rather than removing the basement square footage and reporting it separately as ADU living area. The basement itself is the area that could function as the ADU; the ADU does not represent additional physical area beyond the basement. Simply stated, the square footage belongs to the basement; the ADU designation describes how the basement is configured and could be used.

Removing the ADU area from the basement reporting would result in the grid no longer accurately reflecting the actual size of the basement. On the other hand, reporting and adjusting for the entire finished basement and then separately reporting and adjusting for the same square footage as an ADU could result in recognizing or effectively double counting the same physical area twice.

I would still consider any additional market-supported utility attributable to the basement's configuration and potential use as an ADU, but without separately counting the same square footage a second time.

How would you handle this—both the ADU classification when it is not currently being used as one and the square-footage treatment when the potential ADU is entirely below grade?

Thanks in advance!

 

[Tom D]

Finished basement with a kitchen if the are no adu basement comps. Proving an increased value for something you can't actually prove is a potential threat to a visit wit the atate.

Does the basement adu have access to to the outside without going thru the house. And if you so desire, how much more value does it have because of the kitchen. Please show us how you derived your adjustment and what you used to get your foot into this bear trap

 

[Dublin ohio]

Is there two methods of ingress/egress? If it has a separate bedroom, does it have two legal methods of ingress/egress?

 

[J Grant]

I would appreciate some feedback on how other appraisers would handle the following situation.

The subject has a finished basement with the physical characteristics and potential utility of an ADU. It contains independent space for living, sleeping, cooking, and bathroom facilities and can be accessed without passing through the primary living area. However, it is not currently being utilized as an ADU.

My first question is: Would you identify this as an ADU based on its configuration and independent living facilities even though it is not currently being utilized as one, or would you simply describe it as a finished basement with the potential to function as an ADU?

My follow-up question concerns how the square footage should be handled if it is identified as an ADU.

Fannie Mae states:


The issue I see is that this guidance specifically addresses above-grade living area, while in this situation the entire ADU configuration is within the basement.

My inclination would be to continue reporting the entire finished area within the applicable below-grade/basement line of the sales comparison grid (after all, the basement is contained within the primary dwelling) rather than removing the basement square footage and reporting it separately as ADU living area. The basement itself is the area that could function as the ADU; the ADU does not represent additional physical area beyond the basement. Simply stated, the square footage belongs to the basement; the ADU designation describes how the basement is configured and could be used.

Removing the ADU area from the basement reporting would result in the grid no longer accurately reflecting the actual size of the basement. On the other hand, reporting and adjusting for the entire finished basement and then separately reporting and adjusting for the same square footage as an ADU could result in recognizing or effectively double counting the same physical area twice.

I would still consider any additional market-supported utility attributable to the basement's configuration and potential use as an ADU, but without separately counting the same square footage a second time.

How would you handle this—both the ADU classification when it is not currently being used as one and the square-footage treatment when the potential ADU is entirely below grade?

Thanks in advance!

Imo-.. the basement is below grade and can not be included in above-ground SF, period. Whether you designate it an ADU or not, it is below grade.

I did not see the property and have no idea of the size or finish of the kitchen or space. The fact that it is not currently utilized as an ADU, does that mean it is vacant? Being vacant does not change what a property is. Does it have windows? Even though it has access without passing through the primary living area, can it ALSO be accessed through the primary living area ?
If it can be accessed through the primary living area, I would be inclined to call it a finished basement with a kitchen.

If the only egress is outside the primary living area...then IDK. It might be a basement ADU. But without seeing it is hard to tell.

 

[NJ Valuator]

Is there two methods of ingress/egress? If it has a separate bedroom, does it have two legal methods of ingress/egress?

Yes, thru basement window and separate walk up outside entrance.

 

[Trihard]

I would call it a finished basement if you can access the rest of the house through the interior, like if there are interior stairs from the basement to the rest of the house. ADU, if there isn't access through the interior. If it really is an ADU, just report the rooms on the basement section of the grid with no adjustment and only do a bottom line adjustment for the entire ADU. Followed by an explanation that the form is limited in what it can do and you are only reporting the rooms on the basement section of the grid but the ADU has its own adjustment on the bottom of the grid.

 

[NJ Valuator]

Imo-.. the basement is below grade and can not be included in above-ground SF, period. Whether you designate it an ADU or not, it is below grade.

I did not see the property and have no idea of the size or finish of the kitchen or space. The fact that it is not currently utilized as an ADU, does that mean it is vacant? Being vacant does not change what a property is. Does it have windows? Even though it has access without passing through the primary living area, can it ALSO be accessed through the primary living area ?
If it can be accessed through the primary living area, I would be inclined to call it a finished basement with a kitchen.

If the only egress is outside the primary living area...then IDK. It might be a basement ADU. But without seeing it is hard to tell.

Thanks, I appreciate the feedback. And of course, I agree that below-grade square footage cannot be included in the above-grade GLA, regardless of whether the area is considered an ADU.

My question regarding the square footage is a little different. If the finished basement is determined to be an ADU, should the ADU square footage be broken out and adjusted for on a separate line in the sales grid, or should it remain included within the basement square footage and finished basement section of the grid?

My concern with breaking it out separately is that the ADU does not represent additional physical area beyond the basement. The basement itself is the area comprising the potential ADU. If I report and adjust for the entire basement and then separately report and adjust for that same square footage as an ADU, it seems that I could potentially be recognizing the same physical area twice. On the other hand, if I remove the ADU square footage from the basement section and report it separately, the grid would no longer reflect the property's actual basement square footage.

For additional context, the basement contains approximately 2,862 square feet, of which approximately 95% is professionally finished. It is not vacant and is currently being used as part of the overall residence rather than being independently occupied as a separate dwelling unit. There is interior access to the basement, as well as separate exterior access.

 

[Trihard]

There is interior access to the basement

It's not an ADU then.

 

[glenn walker]

Sounds like a ADU but like any below grade basement and not included in the main GLA. The ADU Occupancy doesn't change what it is-no more than a empty bedroom disappears. Just State ADU is not currently used as a separate living area.

 

[NJ Valuator]

It's not an ADU then.

Per Fannie Mae:

• The ADU may, but is not required to, include access to the primary dwelling. However, it is not considered an ADU if it can only be accessed through the primary dwelling or the area is open to the primary dwelling with no expectation of privacy.