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Master bedroom suite converted to ADU

C&L

Thread Starter
Sophomore Member
Joined
Sep 27, 2004
Professional Status
Certified Residential Appraiser
State
California
Hi...
First time I've come across this, but have a feeling it will be more frequent....

Single story, SFR, total 1700 sqft. County records shows 1700 sqft. Rear of the house was the master bed/bath, but they put an interior wall up, added a kitchen and now rent it as an apartment. Now we have an ADU 1/1 at 300 sqft and the main home 3/2 at 1400 sqft.

How would you grid this?

- 3/2 1400 sqft home and line item the in-law unit at the bottom of the grid?
- 4/3 1700 sqft home and note the in-law unit or give an adjustment for an "in-law unit option"? As it could be easily converted back to a master bedroom suite.

I guess I feel weird subtracting out GLA from the main home, since it will be inferior comps going from 1700 sqft to 1400 sqft.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Such a division, imnsho, suggests a certain amount of obsolescence. I do not agree with requiring the removal of a wall as a condition of value (creating something that does not exist) but if the cost of conversion is anything, it is a measure of functional obsolescence created. So...if rented out, is your lender comfortable with that? So do you have a comp with an accessory unit? You will need at least 1 for fannie mae.
1580532549714.png FHA 1580532716899.png 1580532756975.png
 

Joe Flacco

Elite Member
Joined
Jul 31, 2013
Professional Status
Certified Residential Appraiser
State
Maryland
I would most likely report it as 1,400 SF primary residence + 300 SF accessory unit on a separate line.
 
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J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Hi...
First time I've come across this, but have a feeling it will be more frequent....

Single story, SFR, total 1700 sqft. County records shows 1700 sqft. Rear of the house was the master bed/bath, but they put an interior wall up, added a kitchen and now rent it as an apartment. Now we have an ADU 1/1 at 300 sqft and the main home 3/2 at 1400 sqft.

How would you grid this?

- 3/2 1400 sqft home and line item the in-law unit at the bottom of the grid?
- 4/3 1700 sqft home and note the in-law unit or give an adjustment for an "in-law unit option"? As it could be easily converted back to a master bedroom suite.

I guess I feel weird subtracting out GLA from the main home, since it will be inferior comps going from 1700 sqft to 1400 sqft.
Well yes it would be inferior to larger comps, and by creating bootleg rental units owners can devalue their house. (in certain cases, not always. /a positive value MIL suite or ADU is in addition to the main dwelling , aka 1700 sf house with an attached or detached additional SF ADU

What these folks did,, is create a one/one apt for extra income - so first let client know. A lender can have their own guidelines and insist the second kitchen stove ( if there is one ) be removed, or having part of house rented might take it out of owner occupied /kill the loan.

Then if appraisal proceeds per client, you have a decision to make, treat it as a 1400 sf with an ADU ( in which case you will need at least one smaller/ similar sf comp to bracket ), or treat it as a 1700 sf house with a wall up with possible obsolescence -assuming most buyers in that market would prefer a larger house and not one cut up for a rental unit.
Zoning can be an issue as well, though fannie lends on dwellings out of compliance with zoning - ( non permitted ) but then expects appraiser to come up with at least two similar non permitted/non zoning compliant comps. Good luck with that...
 
Last edited:

OSU Beavers

Elite Member
Joined
Jan 10, 2007
Professional Status
Licensed Appraiser
State
Oregon
If it is an actual wall then
- 3/2 1400 sqft home and line item the in-law unit at the bottom of the grid

If it were a locked fire resistant door that could be easily converted back to a master bedroom suite then
- 4/3 1700 sqft home and note the in-law unit or give an adjustment for an "in-law unit option"
 
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Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
Hi...
First time I've come across this, but have a feeling it will be more frequent....

Single story, SFR, total 1700 sqft. County records shows 1700 sqft. Rear of the house was the master bed/bath, but they put an interior wall up, added a kitchen and now rent it as an apartment. Now we have an ADU 1/1 at 300 sqft and the main home 3/2 at 1400 sqft.

How would you grid this?

- 3/2 1400 sqft home and line item the in-law unit at the bottom of the grid?
- 4/3 1700 sqft home and note the in-law unit or give an adjustment for an "in-law unit option"? As it could be easily converted back to a master bedroom suite.

I guess I feel weird subtracting out GLA from the main home, since it will be inferior comps going from 1700 sqft to 1400 sqft.
Your post is asking how to grid it, not what to call it, correct?
Assuming you determined H&B U is a legal 1 family with an ADU, does that wall completely separate it from the main house? If so, do not include it into the GLA and room count but value it separately (I usually put it in the “functional“ field). If there is a door that can be easily removed and the rest of the space allows a normal flow to the main dwelling, include it into the GLA and room count.

I would also check the legality again. In my market at least, I have never come across a situation where the Building Inspector allows a single family with an ADU to have the ADU rented out. It needs to be occupied by a family member.
 
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C&L

Thread Starter
Sophomore Member
Joined
Sep 27, 2004
Professional Status
Certified Residential Appraiser
State
California
I decided to put "Appraiser notes: Appraiser doesn't feel like taking new comp photos, appraisal is good enough." :giggle:

Great advice everyone, I see there are a few ways to approach it, always reminds me that this business is a bit of art with the "science". I just got an email from, the ever-knowing, wise and holy, Big Brother, AMC and they asked me to separate the two into 1400 sqft SFR and 300 sqft ADU. So, I will do as my Master commands. Now I just have to wait for the loan underwriter to review it in a week and ask me to put it back as a 1700 sqft SFR. :cryingsmiley:
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Hi...
First time I've come across this, but have a feeling it will be more frequent....

Single story, SFR, total 1700 sqft. County records shows 1700 sqft. Rear of the house was the master bed/bath, but they put an interior wall up, added a kitchen and now rent it as an apartment. Now we have an ADU 1/1 at 300 sqft and the main home 3/2 at 1400 sqft.

How would you grid this?

- 3/2 1400 sqft home and line item the in-law unit at the bottom of the grid?
- 4/3 1700 sqft home and note the in-law unit or give an adjustment for an "in-law unit option"? As it could be easily converted back to a master bedroom suite.

I guess I feel weird subtracting out GLA from the main home, since it will be inferior comps going from 1700 sqft to 1400 sqft.
Does zoning allow this?
 
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