Home purchase loan and Home style for ADU build

[David Maldonado]

Hi everyone,

I am planning on purchasing another home to househack and I would like to build an ADU ASAP after closing on the house. I've read that with the homestyle loan, an ADU can be built and the funds from the homestyle loan will be added on top of the home purchase loan.

The ADU will offset a big chunk of the mortgage.

Anyone go this route? 

Does anyone know or any lenders that offer this?

thanks!

[Brad S.]

Hey @David Maldonado

Longtime SoCal appraiser/broker/investor here. So, the Dejoy sale is 2 years old, as you said, and it has 2 ADU's (I assume ADU + JADU), or has a total of 3 units. And the Monroe house looks to be similar, with 3 units. So, neither of those are good comps for your proposed SFR + ADU. So, if an appraiser decided to use those, they should adjust downward for the 3rd unit and calculate a time trend adjustment for the older sale. But, more likely, they would probably just not use those, due to the 3rd units. Either way, they would adjust lower than the sale/list prices.

I did a quick and dirty mls search for that area (around Main St and North) over the past 12 months and found 2 active listings, 2 pendings, and 8 solds. I only found 1 comp with 1 ADU, 821 E Hermosa St, sold 8/2/23 for $749k and 1 pending 822 E Fesler St listed at $769k.

That suggests a huge disparity between those properties with 1 ADU and 2 ADU's. While that doesn't necessarily mean the 3rd unit is worth $300k+ more, it does point to much more market analysis should be done. But, unfortunately, most people ordering appraisals these days (typically AMCs - appraisal management companies) don't pay enough for good appraisers to accept their assignments, and therefore, many appraisal reports lack good results. So, they are more likely to rely on the easy data they find, without delving into the market data more to verify it. That said, the market analysis may still show a large appeal and therefore, price disparity for an sfr + 2 adu's as compared to an sfr + adu. That is the "fun" part of the adu market, until there is enough data to adequately reflect the market's reaction.

When I expand the search results to the Orcutt area, there is a sale of an sfr + adu, 1498 Claret Ln, sold for $1,165,000 on 3/7/24.

And that's all there is using the mls with the newish search field for ADUs. Another option for appraisers is potentially find any sfr sales with guest houses and/or duplex properties and analyze and adjust accordingly. They might also need to spend a lot more time diving further into the mls listings to search through the comments to see if any adu properties are hiding. 

Anyway, I'm happy to discuss specifics if you want. Feel free to dm me.