Investor · Sacramento · Member since 2019 · 19 posts · 11 votes
I'm hitting a wall with an appraiser who refuses to value an ADU (accessory dwelling) on a SFR I'm trying to BRRRR. I bought a 4br/2 bath SFR and split it down the middle. After a full gut job - (new roof, windows, 2 kitchens, bathrooms, floors, electrical and plumbing) I have a 2000sq foot home with a 1200sq/ft, 2br/1ba main home and an attached 800sq/ft, 2br/1ba ADU. Both units are fully remodeled.
The appraiser is only appraising the main residence (1200sq/ft) and refuses to provide a value for the ADU. Thus, I can't seem to get an accurate value for the whole residence and so I can't pull the equity out of the house on the refi.
I have formally created separate addresses through the county and separated utilities. Both units are rented.
House is in the Arden/Arcade area.
Any advice on how to get the appraiser to properly value the ADU and give me an accurate value for the whole property?
Real Estate Investor · Sacramento · Member since 2015 · 20 posts · 4 votes
5y
Did you add any sq ft to the property or did you just convert a SFR into a 2 unit? Out of curiosity, what was the appraiser's reasoning for not including the entire square footage?
I'd also see if there are any comps you can pull from the MLS. Given how new this is in Sac it might be difficult to find at this point. You can also challenge the appraisal with the bank or try another lender.
Did you add any sq ft to the property or did you just convert a SFR into a 2 unit? Out of curiosity, what was the appraiser's reasoning for not including the entire square footage?
I did not add any sq ft to the property. Just split the house down the middle and created to residences. the smaller of the two being the ADU.
The appraiser says that because they do not connect they will only take into account the sq ft of the main residence. upon appeal they assigned the ADU a value of $15,000. The remodel alone cost much more than that.
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
5y
In CA, it is imperative to understand how an ADU will appraise before adding the ADU. in most CA markets, ADUs are appraising far below the hands off costs of the ADU addition.
The return is currently achieved by appreciation and increased cash flow. The negative position consumes the initial cash flow; sometimes it consumes years of cash flow to recover the negative position.
In most markets, ADU additions are not typically value adds. They cost more to add (hands off) than the value they add.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
5y
"How to get an accurate appraisal on a SFR with an ADU"
Provide data showing that other properties similar to yours (in terms of ADU, etc), in your neighborhood, right now, are actually selling for XYZ dollar amount. That's it. That's all you can do. If other properties similar to yours are NOT selling for XYZ dollar amount, how could you possibly say that the appraisal isn't accurate?