Garage is currently being converted to an ADU

[bnmappraisal]

What does your client say?
Do they want an AS IS appraised value or SUBJ TO completion ???
That would determine your course of action(s)

 

[shrubberyvaluation]

What does your client say?
Do they want an AS IS appraised value or SUBJ TO completion ???
That would determine your course of action(s)

Yes it is good to have this discussion. Mind you regardless you can't give value to anything, you analyze the market and report.

 

[Terrel L. Shields]

Our jobs as residential RE appraisers is to reflect the typical home buyer. Our first reference is to look at the local market. Assuming ADU-garage conversions aren't commonplace in this market: When most people buy a house, they want to park their car in a garage. The highest and best use is as a garage. Legal or not, pretty or ugly, the conversion is considered functional obsolescence. Figure out the cost to cure (convert it back to a garage), and make adjustments across your comps and cost approach if necessary.

Summary: No value for ADU, subtract the cost to cure. I would estimate 5-7 thousand dollars but results may vary depending on local market.

Maybe so, maybe no. ADUs are becoming more and more popular and depending upon market the garage may be much less useful. Of course, in high crime areas, leaving a car outside is inviting a theft or break in of the car.

As for reflecting the "typical" buyer, we also may want to limit that to the buyer who wants a particular item or sees an opportunity to convert to what they want. A friend hunted for months to find a home with a detached garage in addition to a built in garage. He converted it to a workshop for his leathercrafting. He had to also consider what his wife wanted in a house, so their house hunting was quite extensive before the right property at the right price popped up. We think we know what buyers want but in reality we are simply looking at what has sold and figuring what we think the buyers were wanting.

 

[CA123]

Our jobs as residential RE appraisers is to reflect the typical home buyer. Our first reference is to look at the local market. Assuming ADU-garage conversions aren't commonplace in this market: When most people buy a house, they want to park their car in a garage. The highest and best use is as a garage. Legal or not, pretty or ugly, the conversion is considered functional obsolescence. Figure out the cost to cure (convert it back to a garage), and make adjustments across your comps and cost approach if necessary.

Summary: No value for ADU, subtract the cost to cure. I would estimate 5-7 thousand dollars but results may vary depending on local market.

this makes sense, thank you

 

[CA123]

What does your client say?
Do they want an AS IS appraised value or SUBJ TO completion ???
That would determine your course of action(s)

as is

 

[Mark K]

Mechanic liens.

So what? That can happen on any property.

Not in our SOW to consider liens of any type.

 

[bnmappraisal]

as is

Then, as others have said, I would be looking at other sales (potential comps) that sold with similar "unfinished" items/amenities to determine market reaction

I have a client (not high volume) that wants both AS IS and SUBJ TO repairs values.
The SUBJ TO usually isn't an issue, but the AS IS definitely takes more time to research and figure out

I would also recommend speaking with some agents and/or investors you know who deal with Flips/Investor properties.
They can be a great resource as to what the "typical buyer" may consider in this type of property

 

[J Grant]

yes, but the house itself is perfect, just remodeled, it's just the garage that's being converted. why would that impact the appraisal?

Because it is unfinished construction and a garage is part of the improvements. Ask the client how they want you to proceed - subject to completion or As Is

If it is AS IS there is likely some contributory value to what exists - how much though is the hard part.

 

[Damienvball]

Owners bought the home in 2022 with a nice large 22' x 30' 2 car garage in the backyard. I just appraised the home and the garage is in process of being converted into an ADU. footings are dug, driveway has been partially removed for plumbing, sewer, electrical, etc. My question is would you give the garage any value at its current state (under construction, cant park in it) My gut says "no value" but I'd like to ask the community.

thank you,
CA123

inform the lender and they will tell you how to proceed

 

[J Grant]

View attachment 72673
here's the garage in question, there's substantial work being done to the garage and the surrounding area

judging by the photo, it is still a garage!! A garage with a missing door, a trench of some kind in front for utilities ? and a torn-up yard./no more driveway.

Note : a value opinion is not ONLY about the $ impact on value, it is also about the impact on estimated market exposure - since the majority of buyers are not looking for a project, it will likely greatly increase the DOM and estimated market exposure. you can ask some local RE agent's view on it for support.

Moving on from there, this photo shows a garage or home conversion project in such an unfinished state it likely will have a negative impact on value (I had assumed a construction further along). Whether a buyer prefers returning it to a garage or continuing on to finish it as a living area ADU or just a room, they have major costs and headaches of construction to take on. AS IS it might be investor bait who always expect a discount. The appraiser needs to ask the client whether the report should be AS IS or subject to completion, send them the photo so they can judge for themselves.