Attached Jr ADU Appraisal Question

[Steve V.]

Not sure if this is the correct category. 

I plan to build out an attached Jr ADU from garage in SoCal and I was wondering how does the appraisal work for something that is attached? I have seen people post about not getting the right appraisal because the appraiser didn't know how to appraised a detached ADU that is not part of the house. Has anyone ran into any issue with getting the house appraised with the attached jr ADU? Thanks

[Dan H.]

In general, ADUs appraise for below the hands off cost of adding the ADU. JADUs appraise worse than ADUs (I believe this to be universal so am not even prefacing it with in general).

There are exceptions to the first statement.  You should look for comps that can be used to justify a valuation.  If you cannot find these comps, then recognize that the appraiser is likely to be challenged to find appropriate comps.  In the absence of comps, you really have no evidence to know how the appraiser will value the JADU and I would go with my statements in my first paragraph.  In the absence of comps, your JADU is likely to be have a value set by the appraiser far less than the hands off cost of adding the JADU.

In addition, the JADU limits exit options because it requires owner occupancy to use the JADU as a rental.  This implies that the best use is achieved by house hacking investors.  Investors that are not house hacking, cannot legally rent the JADU. Reducing the buyer pool typically leads to reduced values.

Good luck