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Updated over 4 years ago on . Most recent reply

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Peter Lee
  • Developer
  • Los Angeles, CA
13
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101
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How are sale values of ADU's?

Peter Lee
  • Developer
  • Los Angeles, CA
Posted

Anyone have recent experience on how an ADU (accessory dwelling unit) or backhouse is valued these days relative to the main house?

For example, say if you have a house that is 1500sf and it would normally sell for $500/sf, what are people's thoughts if there was an ADU of 750sf built in the back with similar construction type as the main house?

Would future buyers significantly discount the ADU? If so, how much? 10, 20, 30% relative to the cost/sf of the main house?

Most Popular Reply

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Jon Schwartz
  • Realtor
  • Los Angeles, CA
1,152
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952
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Jon Schwartz
  • Realtor
  • Los Angeles, CA
Replied
Originally posted by @Peter Lee:

Anyone have recent experience on how an ADU (accessory dwelling unit) or backhouse is valued these days relative to the main house?

For example, say if you have a house that is 1500sf and it would normally sell for $500/sf, what are people's thoughts if there was an ADU of 750sf built in the back with similar construction type as the main house?

Would future buyers significantly discount the ADU? If so, how much? 10, 20, 30% relative to the cost/sf of the main house?

John,

I'm a realtor in LA.

I'm been told by lenders that ADU's aren't appraised as additional square footage. They're appraised as an amenity, like a swimming pool or garage. Most appraisers are assigning about $50K as the value of an ADU. So for appraisals, the value isn't there.

In terms of buyers' perspectives, in my experience, ADUs don't carry the same value per square foot as the main house. For example, I'm in contract on a 2/1 in the Valley with a studio ADU attached. Compared to recent sales, we're paying more per square foot than nearby 2/1's and less than nearby 3/2's. From the seller's perspective, there's plenty of value in the ADU, but it's still a 2/1 house.

My advice is if you're considering building an ADU is to consider rental income, not resale value. The resale value won't make you much return; if you're planning to hold the property for a few years, the rental income from the ADU will generate your return.

Good luck!

Best,

Jon

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