Finished Basement an ADU?

[Fernando]

I completed an order a few months ago on a home that has a finished walk-out basement which includes a kitchen, bath, bedroom, and a living room type area. The basement is accessible from both inside and outside of the home and it is common in this market place to have finished basements similar to this. The client/investor of this order has given me push back from the get go and now they have come back months later to have me consider this basement an ADU. In my opinion, this is not an ADU as every home similar to this would also be considered an ADU.

I looked up Fannie Mae's definition and it appears to broad and general that it leaves so much room for interpretation and left me confused. This is the first time in my 10 years appraising that I have had a client want me to consider a finished walk-out basement, an ADU, and although it would be easy in this instance to just oblige and help, I also want to make sure I'm doing this the correct way.

Has anyone had this issue come up and what have you done?

Also, in 10 years appraising, I have only dealt with 3 properties with an ADU, all of which had a detached ADU on the same parcel.

I'd done many appraisals with ADUs whether legal or illegal. Each one is different situation but all pain in the as*.
Sometimes I look at it in terms of buyer or agent and ask myself if I would buy such a property in its state and condition.

As an appraiser, you see the ADU as what it is and see how the market reacts to it. There is no easy solution. I can't hold your hand since each ADU is different.
Do your due diligence and look for appropriate comps and you'll know if you're as good an appraiser as you think.

 

[Terrel L. Shields]

BTW If I did the report 3 months ago or more, I'd tell them that I am done with the appraisal and if they need anything else, they need to pay for it...up front.