Are they doing everything they can to expose properties to the widest possible market?

For most investors, the 1% rule is a quick way to determine if a deal is worth looking into further, but not as a determining factor to buy or not. 

Different jurisdictions and areas implement land use vastly differently depending on several factors...so you may be fine to just continue the use...or it could be required to be demo'd if you want to pursue anything outside of the current land use...it all depends on the local codes. 

BUT the kicker is that, low and behold, they did not factor in the (probably because it's not legit) addition to the back of the home.

50:50 between the two units or do you factor occupancy in there as a unit with 2 people will use more water than a unit with 1 person (in general).

Also tax record indicated as 3,787 sqft (I understand this could be differ than actual), and other public factor indicating this property as 3,700~3,800 sqft.

@Michael Opper I'd say it depends on a few different factors, but I'd say yes.1) Are they a good tenant and do you want them to stay long term?

Harvey,There are a variety of factors at play, region will play a factor, age of property will play a factor, diminishing returns plays a factor (for instance going from 2nd to 3rd bedroom will be more valuable then 3rd going to 4th) To me the key to to a CMA is get as close of comp as you can when it comes to these factors (square footage, bedrooms, bathrooms, age, size of garage, size of yard) Once you start diverting too far it become a bit more of an art then a science. 

Factor that into your calculations before it happens.d) I have built an off-grid cabin for personal use. 575 sf.

If they don’t really mention numbers such as factoring in repairs, capex and vacancy then I would move on.