Seattle ADU Information?

Question

Looking to learn more about the new ADU regulations in the Seattle area. Any help or direction is appreciated.

I’ve seen posts on the BP forums of people selling ADUs as separate Condos/homes and wanted to see if this was legitimate.

From other posts it looks like in CA there are issues with appraisals for ADUs. Does this also occur in the Seattle market? Even if you do build a new ADU, will no one be able to obtain financing to purchase if it? Does the appraisal depend on the lot's zoning?

The scenario would be building one of the pre-approved ADU models.

A lot of questions but any help on who knows/specializes in these areas would be greatly appreciated!

Drew

Michael Haas · Answer

@Drew Corwin are you thinking about an attached (usually basement) ADU, or a detached backyard cottage (DADU?)And are you looking into building one on a property you already own, or looking to acquire a property that has an ADU or ADU potential?Happy to share the info that's most useful to you depending on where you are in the process. Cheers!

Michael Haas · Answer

Thanks for the context Drew!Almost every Seattle city lot can legally house an ADU - the minimum requirements are lot area must be greater than 3200 sq ft (in single family zones, no limit in Low Rise zones) and lot coverage cannot exceed 35% (usually, there are some special exception to this though). Given the basic requirements, any lot that has sufficient space to physically house an ADU likely is legal to build on, and lots that have existing multistory houses tend to be best (as the lot coverage on a multi story house will be lower than the lot coverage on a single family house with the same square footage). That being said, some lots are easier than others, and some lots have higher value than others.When we're buying lots for ourselves or clients to build a DADU we have a strong preference for the following:1. Corner lots: This allows you to be creative with what is the "backyard" and what is the "front yard", which helps with placement of the DADU and setbacks. Corner lots also allow the main house to be accessed from one street, while the DADU is accessed from another street, increasing parking and privacy for the two units.2. Lots with back alley access: Like corner lots, this is because of the setbacks and accessibility. Typically you need a 5 foot setback from the back lot-line, but if you have a back alley the setback requirement is removed and you can build right on the lot line! This results in more buildable area, larger yards for both the ADU and the DADU, more privacy, and better accessibility (if the back alley provides parking access for the DADU)3. Level lots: As with all development projects, steep slopes tend to increase complexity and cost.Since you're planning on selling the DADU separately is this a flip for you would you be owner occupying?You cannot split the lot and sell the DADU separately, but you can "Condo-ize" the lot. An experienced real estate lawyer can walk you through this process, but essentially you will create a condo association and have the two homes be the two "members" or "units" in the condo. Then you can sell one, or both, of the homes separately, in much the same way that you can sell each unit in a condo separately. The owners will be responsible for their individual units, and the condo association will own and oversee the land that the two homes / units are on.I think "condo-izing" is a great strategy for flippers, but there are definite benefits to keeping both units as rentals if you're a rental property investor. I'll almost always take long term cashflow and appreciation over big short term gains (and the taxes that come with them!).Happy to talk more about the strategy and tactics, feel free to reach out if you'd like to chat on the phone or grab a coffee. Cheers!

Michael Haas · Answer

@Drew Corwin yes, I'm both a Realtor and an investor, working primarily with investors and house hackers.We've done a lot of ADU's and are beginning to do more DADU's, but since I'm more of a rental property investor than a flipper these tend to be buy-and-holds, so we don't cond-ize and sell the DADU. It is something we'd consider if we decided to lighten up our rental portfolio at a later date.I shot you a DM - happy to do a phone call or coffee to chat more about the strategy. Cheers!

Drew Corwin · Answer

@Michael HaasHey Michael,Sorry for the delayed response. Thanks a lot for the information. Very helpful.With this condo-izing strategy, have you personally been involved on these? This is very interesting and I’ve actually stumbled upon one property currently on the market doing this.I’m curious if there are comps out there for these condo-ized DADUs that have been sold for appraisal purposes. Starting the research on these projects now. Are you an agent or are these something you’ve considered?Would be great to touch base some time.Drew

Drew Corwin · Answer

Hey Michael,Thanks for the response.The situation is building from scratch a new pre-approved designed DADU cottage style in the backyard. Actively searching for the right property but looking to see if this is feasible before moving forward. The main thing I am trying to understand is whether or not you can sell the newly built DADU separately from the main property. Any help would be appreciated!Drew

Drew Corwin · Answer

@Sherief ElbassuoniHi Sherief,Thanks a lot for the response and the info.Correct. I’m speaking on the expanded ADU that came into effect recently, specifically a DADU on a SFH zoned property within Seattle.Just to clarify, you have had clients actually build one of these DADUs and sell them separately from the main property? Did the buyers of the DADU pay cash or were they able to get financing for the purchase? Another question is how do you split/subdivide the property to allow for the sale of the DADU? What is this called when you do this? Condominimizing? Would be great to hear how your clients did it to get some context.Sorry for all the questions! Very interesting topic.Drew

Sherief Elbassuoni · Answer

@Drew Corwin, thanks for your post. ADU has been in Seattle for very long time. I think what you mean with the "new" ADU regulations is: Buying a home with a big yard, get permits for Detached ADU, build Detached ADU, split the two homes into detached condos, then seel the detached ADU.If this is what you mean, yes, this is legit, and we started to see more deals and more listings that are coming from this method lately.For appraisal, this is a little tricky to be honest with you. It is pretty new and not all appraisal knows how to deal with it. Some appraisals will appraise it high (which makes sense), and some other appraisals will still see it as amenity (which doesn't make a lot of sense)Appraisal will depend on many things like location, size, finishes,.....I hope this helps.