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Understanding Accessory Dwelling Units (ADUs) in Single-Family Homes

A single-family home may contain an accessory dwelling unit (ADU), also known as a "mother-in-law unit" or "guest apartment." ADUs are self-contained living units with their own private bathroom and kitchen and direct access from the outside. They can be either attached or detached and located above or below grade.

Key Features of an ADU:

• Facilities:An ADU includes a full bathroom and a kitchen equipped with cabinets, a countertop for food preparation, a sink with running water, and a stove or stove hookup. Note that hotplates, microwave ovens, or toaster ovens are not considered stoves. Removing the stove does not change the classification of the space as an ADU.
• Structure:Only one ADU is allowed per property. It must have a separate entrance for ingress and egress. Simply having a second kitchen does not make a property an ADU.
• Regulations:ADUs must comply with local zoning and land use requirements and be typical for the area. Illegal use based on zoning is not permitted.

Guidelines for ADUs:

• Fannie Mae:Permits an ADU only when the subject property is a single-family, one-unit property.
• Freddie Mac and Non-Agency:Permit a single ADU when the subject property is a one, two, or three-unit property.

The appraisal report must specify whether the ADU complies with zoning and land use requirements (legal or legal non-conforming) and whether it is typical for the area.

Non-Permitted ADUs:

A non-permitted ADU (built without a permit) that complies with zoning may be eligible under certain conditions:

• The property must be a single-family, one-unit residence.
• The appraisal report must demonstrate that the improvements are typical for the market through an analysis of at least two comparable properties with ADUs also built without permits.

Characteristics of an ADU:

• Size:The ADU must be subordinate in size to the primary dwelling.
• Features:The ADU must have its own means of ingress/egress, kitchen, living area, and bathroom. A bedroom is not required; studio ADUs are acceptable.
• Access:The ADU may include access to the primary dwelling but is not considered an ADU if it can only be accessed through the primary dwelling or if it is open to the primary dwelling with no expectation of privacy.

Examples of ADUs:

• A living area over a garage
• A living area in a basement
• A small addition to the primary dwelling

Determining Property Classification:

Whether a property is defined as a one-unit property with an accessory unit or a two-to-four-unit property will depend on various characteristics, such as:

• The existence of separate utility meters
• A unique postal address for each unit
• The legality of renting the separate dwelling space

Appraisers should describe how they determined whether the separate dwelling area is an ADU or an additional multi-family unit.

Understanding and correctly identifying ADUs is crucial for accurate property valuation and compliance with lending guidelines. By adhering to these guidelines, appraisers can ensure they provide reliable and consistent appraisals for properties with ADUs.

Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading!  

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