Detached Garage Apartment-Sngl Family with Assessory or Duplex

[RNMOVR]

I'm looking for definitive documentation from Fannie Mae on their guidelines that distinguish a single family with accessory unit from a duplex. I always thought that a duplex had to be attached, but that may be a misconception on my part. Below are the FHA/HUD guidelines, but I need to get FNMA's take on it.

I'm working on a 2 story single family with a detached 1/1 garage apartment with separate utilities that is used as a rental. I have not found out if it is legal, illegal, or legal non-conforming. That is of no relevance to my question. I am looking for FNMA's definition of what the distinguishing characteristics of the two are.

I have searched FNMA's consumer and business-business site with no luck. I read every post I could find on AF in reference to this, but none of them every gave a definitive answer beyond what the local municipalities considered it. Any insight or direction would be greatly appreciated. If this was an FHA loan than I suppose it would be a duplex due to the separate utilities.


Accessory Unit / Accessory Dwelling Unit

The accessory unit is defined as a habitable living unit added to, created within, or detached from a single-family dwelling that provides the basic requirements for living, sleeping, eating, cooking, and sanitation.

Accessory Dwelling Units (ADUs) are commonly understood to be a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single-family lot. ADUs are usually subordinate in size, location, and appearance to the primary unit and may or may not have separate means of ingress or egress.

Attached units, contained within a single-family home, known variously as "mother-in-law apartments," are the most common type of accessory dwelling unit. Accessory units usually involve the renovation of a garage, basement, or small addition to a single-family home.

FHA Criteria
“Accessory dwelling unit" means a subordinate dwelling unit may or may not be incorporated within, or detached from a single-family structure. Accessory units may not be subdivided or otherwise segregated in ownership from the primary residence structure.

Some accessory units may predate the adoption of local zoning ordinance and may therefore be classified as legal nonconforming units.

Utility Service Requirements

An accessory apartment must be connected to the utilities (except telephone, television and cable) of the dwelling unit and may not have separate services.

Please excuse my spelling of Accessory in the title

 

[CANative]

I have not found out if it is legal, illegal, or legal non-conforming. That is of no relevance to my question.

How could that be of no relevance? It's the first order of business in solving your problem/question.

After that, figure out the income potential. Is this a tail wagging a dog?

 

[Mike Kennedy]

Greg is correct, you appear to be putting the cart before the horse:

XI, 404.01: Zoning (01/31/06)
The appraiser is responsible for reporting the specific zoning classification for the subject property. The appraiser must include a general statement to describe what the zoning permits—“one-family,” “two-family,” etc.—when he or she indicates a specific zoning such as R-1, R-2, etc.

The appraiser also must include a specific statement indicating whether the improvements represent a legal use; a legal, but non-conforming (grandfathered) use; or an illegal use under the zoning regulations; or whether there is no local zoning.

We generally will not purchase or securitize a mortgage on a property if the improvements do not constitute a legally permissible use of the land. We do make certain exceptions to this policy, as long as the property is appraised and underwritten in accordance with the special requirements we impose as a condition to agreeing to make the exception:


•

•We will purchase or securitize a mortgage secured by a one-family or two-family property that includes an illegal additional unit or accessory apartment (which may be referred to as a mother-in-law, mother-daughter, or granny unit) as long as the illegal use conforms to the subject neighborhood and to the market.

The property must be appraised based upon its current use and the borrower must qualify for the mortgage without considering any rental income from the illegal unit.

The appraiser must report that the improvements represent an illegal use and demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use.

The lender also must make sure that the existence of the illegal additional unit will not jeopardize any future hazard insurance claim that might need to be filed for the property. We will not purchase or securitize a mortgage secured by a three-family to four-family property that includes an illegal accessory apartment.

XI, 405: Improvements Analysis (11/01/05)
The appraiser must provide a clear, detailed, and accurate description of the improvements that is consistent with the level of fieldwork we require in connection with the appraisal assignment. The appraiser should be as specific as possible (commenting on such things as needed repairs, additional features, modernization, etc.) and should provide supporting addenda, if necessary.

If the property that is being appraised includes an accessory apartment, the appraiser should describe it in the appraisal report form.

 

[PropertyEconomics]

It must be legal in order to be considered for lending purposes. It must be legal to be considered for valuation purposes.

Legal is the first question that must be answered ... and if the answer is no ... the other questions become moot.

 

[Mztk1]

So, let's pretend the answer is yes it is legal. Then, is it on a single family lot? Is it much smaller than the main house? Most importantly, how would the market preceive the property, as a two family, or as a single family with an accessory unit?

My brother's house in Pittsburgh had an accessory, detached unit over the garage with separate utilities, but it was definately a SFR in a SFR PUD neighborhood and the arrangement was not uncommon for the market.

 

[Lee Lansford]

...I'm working on a 2 story single family with a detached 1/1 garage apartment with separate utilities that is used as a rental. I have not found out if it is legal, illegal, or legal non-conforming....

If this was an FHA loan than I suppose it would be a duplex due to the separate utilities...

/QUOTE]


If you don't know the zoning status, how could you reach a supportable conclusion?

 

[RNMOVR]

Let me ask this question another way.

How could that be of no relevance? It's the first order of business in solving your problem/question.

After that, figure out the income potential. Is this a tail wagging a dog?

I will determine the zoning tomorrow when the courthouse opens, but my point was if it is legal, than what is it. What is the defining characteristics that differentiate the two. I said the legality of the detached unit was of no relevance to my question, not to the appraisal process. I did not want a bunch of responses on zoning and legal uses. Every post I have read on AF in reference seems to talk around the issue. Is is up to the city to determine what you call it? HUD/FHA has their own stance on the differences and I find it hard to believe that FNMA has no opinion on the matter. I understand legal/illegal/legal nonconforming and thanks for your responses to the effect, but no where in my question did I ask what is it considered based upon permissible zoning. So, lets say its legal, what is it?? What is the criteria for the two..

 

[Craig in Oregon]

You might consider

if the ADU could be a legal rental, as if it were a permitted duplex, or if zoning code and the permit for the ADU allow only an owner-occupant (or close relative) in that ADU.

It may be and most likely is a legal unit but may not be rented out on the open market which sends you back to a SFR with accessory unit.

Not that there aren't plenty of ADU's permitted for O-O that end up rented to someone other than a family member. But that's not your problem.

Hope this helps.

 

[Marcia Langley]

RNMOVR,

In addition to what the Fannie or FHA guidelines say, the differences between a two-unit property and a SFR with accessory unit may overlap.

Zoning is, of course the first thing. If it's SFR zoning then it is either an accessory or an illegal unit (or maybe both).

If 2 units are allowed, then some considerations are whether the secondary unit is subordinate to the main unit. For example a traditional side by side duplex of equal GLA and frontage is clearly a two-unit, not an accessory.

But if the second unit is smaller, less accessible fom the street, and on the same meters it could credibly be identified as an accessory unit.

In general all such properties could be identified as a two-unit property but only those having one unit subordinate to the main unit could be classified as accessory.

Some properties could be credibly classified either way.

 

[ZZGAMAZZ]

Seeking guidlines that are "definitive" in the appraisal industry is like seeking "truth" in Classical literature. Every philosopher has his or her own opinion. Our motto is "ethics or bust" although we're held professionally liable for our decisions in the absence of industry standards that might define a concept as pertinent as "ADU."

It's possible that there exist too many real property nuances for standard evenly to apply; and the old-timers will opine that the need to apply critical reasoning is what distinguishes a true professional from a form-filler.

Methinks the industry fails us by refusing to address critical issues like the question posed by the OP.