I talked with a home owner recently who felt like the appraiser undervalued his home since the detached in-law quarters wasn’t included in the square footage in the appraisal. The owner figured the extra 400 square feet would’ve made a huge difference in value. Was the owner right?
Can a detached unit be considered square footage? To be considered as gross living area (square footage), the area needs to be connected to the house and accessible through the house. If you have to go outside the main living area to enter a separate structure, it is really not proper to include as part of the living space of the house according to ANSI standards (“ANSI” stands for “American National Standards Institute”). This means an appraiser should not lump a detached studio, detached in-law unit quarters or other detached areas with the square footage of the main house. On the other hand, if it is attached and accessible through the house, then it can be potentially be counted.
Real Life Example: I appraised a property a while back that was listed at about 4000 square feet in MLS, but it was actually closer to 3000 once I measured it. The problem was that the Listing Agent included the loft above the detached garage and an enclosed patio as GLA, when both should not have been considered as such. The loft was detached from the house by 50 feet or so, and the enclosed patio had no heat source. It was probably disappointing to the agent and seller that the house was much smaller than advertised, but I was still able to assign value to the loft and patio – just not as living area. Ironically, the square footage figure that the Listing Agent used came from a previous appraiser who included the loft and patio as living area. Doh!!
How do buyers see the property? The real question when dealing with detached in-law quarters or any accessory dwelling is how the market sees the structure – and how much buyers are willing to pay for it. In most cases buyers probably prefer to have all the “living area” under one roof. For instance, just yesterday I was asked for advice on whether a home owner should convert an outbuilding to a 1 bed/1 bath studio in the rear yard. The owner essentially wondered if adding a 1/1 studio would make her 2/1 house comparable to 3/2 houses in the neighborhood. How would buyers view this situation? It all depends on the neighborhood and specific market of course, but I would venture to say that generally buyers would look at the house as a 2/1 that has a studio (as opposed to seeing this house as a regular 3/2). The studio could likely contribute to value, but it probably wouldn’t cause buyers to put the house on the same playing field as a normal 3/2 home.
But Public Records Says My House is Larger: It’s worth noting that official records might very well include a detached structure in the overall square footage. Keep in mind this does not mean the appraiser will see it the same way. The county or Assessor could be wrong after all.
Any thoughts or stories to share?
If you liked this post, subscribe by email (or RSS). Thanks for being here.
I had one of these recently too, Ryan. It was a recreation room over a garage, but it was of somewhat less quality than the house, so it was more cut and dried than yours may have been. I think most people do believe that it should be included, and most agents do include it when they should not. Thanks for shedding light on this confusing subject.
Thanks Tom. You’re right that property owners do feel the area should be included. I do hope this helps word get out about how appraisers view the situation.
Timely article. I just had my first test in my Principles of Appraisal class where we had to determine the gross livable area and the teacher tried to trick some students by including an attached, enclosed sun room. I don’t think I got the square footage right, but at least I didn’t count the sun room in my calculations! Enjoy your weekend.
Right on, Brandon. It sounds like you have a good teacher. It sure is important to get the numbers right – especially for the resale market. Including a huge area that is not GLA can have a big impact.
OK, so it is not measured to the same standard as attached footage, but, there must be some value assigned as it is an improvement, assuming its permitted. There is economic value as a potentially rentable unit. Throw me a bone!
Here’s a bone, Jeff. There can definitely be value for the extra unit as I said in the post. It just shouldn’t be lumped in with the square footage. A perfect example would be The Ranch in Wilton. The units with a casita shouldn’t have the entire casita within the GLA, but the casitas can still add to the value.
We are considering attaching our detached garage to our home with a screened porch. The garage is about 14 feet away from our home. The screened porch will be a non-climate controlled space with fireplace and french doors that open to our great room, so it will “feel like” an extension to the living space. We want to add an in-law suite over the garage that is accessible from screen porch. How would the in-law space be viewed in an appraisal? I realize the screen porch will not be counted as living space.
Hi Jenn. Thanks for reaching out. It sounds like you are adding what the appraiser will call an accessory dwelling. This is not a part of the main dwelling, but something extra (hence “accessory”). I actually wrote about the difference between an accessory dwelling and a second unit recently in case it’s of use, though that may be a bit off topic for what you’re looking for (http://sacramentoappraisalblog.com/2014/06/17/is-it-a-second-unit-or-an-accessory-dwelling/).
The appraiser should not consider the in-law suite as living area since it is detached from the residence. The screened porch is not considered living area, so the accessory dwelling is still considered as detached. The added space can of course contribute to the overall value of your home, but it won’t be counted in the main living area.
Does that make sense? If you have additional questions or need any clarification, feel free to comment back or email me.
I recently built my home with a garage and AC and heated pool bath (marble and custom as the house) attached by a covered breeze-way, with contiguous roof and slab. Can the pool house not be counted in the GLA ?
Hi Kelly. Thanks for reaching out. ANSI standards state to be considered gross living area, living space should be directly accessible from the main house. Since one has to exit the main house to get into the pool house, it technically would not be considered living area. However, there are a couple things to consider. Even if the appraiser does not include it as square footage, it might have significant value in your market. The value could be about the same or the same as the price per sq ft of the main house. It really depends on your market. Sometimes owners hear “it’s not worth anything” when an appraiser says it is not square footage, but that is definitely not the case. Moreover, on a practical note I will say appraisers sometimes might actually include detached structures in the square footage if that’s what has been done with all the comps. If houses in your area tend to have separate dwellings or structures lumped into the square footage of the main house in public records, the appraiser might have to simply do the same with your property to keep things consistent. Of course the appraiser will have to make it very clear that he/she did this AND explain why this was done (since it is outside of the normal rules where a detached structure would not be counted). Otherwise if there are few similar detached structures, it’s probably most likely the appraiser would stick to ANSI standards by not including the pool house in the total square footage. In this case an appraiser will ultimately attempt to determine how much value the pool house adds to the property instead of the pool house being lumped in with your main house. Does that make sense?
What about a park model trailer? I’m having problems getting a mortage because they say the park model (which is attached to the ground with wheels removed) is a detached structure, but it can be moved from the property. The underwriter won’t approve a loan even though I don’t count the square footage. Is it better to have the trailer with wheels on it?
Hi Amy. It sounds like you are talking about a mobile home park where you own the home but not the land. If that’s the case, then the structure is considered personal property (not real estate since the land is not owned in any way). I am not sure how the underwriter would handle calculating square footage for personal property since I stick with real estate. Years ago I considered purchasing a mobile home. Had I gone through with it, I would have had to obtain a personal loan (at a much higher interest rate) since I was really purchasing personal property instead of real estate. It did not pan out for me, but the appraisal of the home would have involved appraising only the structure because the land was not owned. I am not sure if that answers your question or not, but you are welcome to pitch in some further thoughts.
Ryan, we have had several opinions on this matter. Maybe you can help. We bought the house I grew up in and it had an attached in law suite. It is only attached by a wall. To gain access into the in law suite you had to access it from an outside door, this part of the house was not accessible from the main house. Since my husband and I have bought the house, we opened a doorway through the attached wall, that now gives us access into the in law suite from the main house. We now have our house for sale. We have had the opinion of 2 appraisers, 1 mortgage broker, and our real estate agent that it would be best left as is- accessible from the main house. We are still a little confused because our house is not selling because the access to the in law suite is in the master bedroom of the main house. What are you thoughts on this?
Hi Donna. Thanks for reaching out. Having a door or not having one doesn’t sound like it would be a major deal-killer because it is not a huge-ticket item to fix. It’s hard to give an opinion on what would be best since I have no idea what market you are in, and I really don’t know the set up in detail without seeing it. It is less common of course to have an accessory dwelling open up to a master bedroom, but there are stranger things in life. I do wonder if there is something else holding the property back. Are you sure it is priced right? If there are no offers yet, it’s hard to think one door is the main culprit (unless I’m missing something). What type of feedback is your agent getting from prospective buyers and their agents about the house and the price? If it is just the door, you can always offer to close the wall up to solve the problem. If it is more than the door, that’s worth exploring. Any thoughts?
Hi Ryan,
I live in Louisiana – rural area out of city limits.
I have a detached RV shed 32′ x 48′. I have a heated & cooled (window unit & portable electric oil furnace heater). office & 1/2 bath in the RCV shed.
I know that it wouldn’t be included in the living area, but would it be considered as additional heated & cooled square footage?
Thanks,
Lee
Hi Lee. Thanks for reaching out. The definitive source to answer your question would be someone in your local market. In my area I would not count it as square footage but as a detached structure not meant for living space. It’s easy to consider something that is detached as an accessory dwelling (which would be like detached square footage (but not lumped in with the main house)), but even an accessory dwelling has a kitchen, bathroom, and sleeping area. In this case it sounds like a tremendous upgraded shed, but it doesn’t meet the minimum to even be called an accessory dwelling. If you want to talk with someone closer to your area, you might consider reaching out to appraiser Bill Cobb (based near Baton Rouge I believe). http://www.accuratevg.com
Thank you for the great article and insightful responses. This helped me out on an offer for a client.
Right on Matt. I’m glad that helped. Thanks for reading and for the comment.
I have a 900 fully finished guest house in my backyard with 2 bedrooms a bathroom a large kitchen, a living room, laundry and two patios but the appraiser only gave me $25000 in value for it saying it was just like a garage. To build this on a lot it would cost over $100k. How is it worth the same as a garage in value?
Hi KC. Thank you for reaching out. It’s hard to comment on your situation since I may not know your market (not sure if you are in Sacramento or not). It’s possible the appraiser nailed value and recognized the market is willing to pay $25,000 for the extra structure. It’s also possible the appraiser was too conservative. How much do you think someone would pay for the extra unit? If you lined up 100 buyers, how much more do you think the group might pay for the property? I say 100 because 1 buyer will always pay mor eor less, but when we are thinking in terms of market value, we are thinking with a bigger picture in mind. Regarding cost, there is very often a difference between cost and value. Just because the unit costs $100K does not mean the market will pay that amount. The same holds true for a kitchen remodel at 40K. A house may only sell for a fraction of that cost more despite the cost instead of 40K more. I look forward to hearing your response. Thank you for the conversation.
I have a property that the lender required two appraisals on, one appraisal came in at value and the other came in significantly under value and the issue seems to be stemming from total square foot of the habitable space.
The main structure is 4500 square feet with an attached but outside accessed 400 square foot casita and a detached 1400 square foot guest structure. I understand that technically the 4500 square feet is the habitable space for the main home but this property is zoned as multi family use and based on my rudimentary understanding of that zoning, wouldn’t both the square foot of the casita and detached guest home be included in the total habitable square feet? I have one appraiser saying yes and the other saying no and its creating a huge problem with my sale.
Does the multi family use zoning affect how the total square foot is calculated?
I appreciate your input as I found this page very informative.
Hi A Messing. Thanks for reaching out. If this is residential it is best to not lump in the square footage together. Here’s the thing though. Just because the square footage figure does not include the other structures does not mean they are not included in the value. If it is a multi-family property one would probably include all the square footage together. Without knowing your location or zoning, it’s hard to say what this is though. It could be a single family home with an accessory dwelling and a casita. It could also be two houses on one lot with a casita. There are many questions to ask to find out if it’s a duplex (two units) or a single family with an accessory unit. I actually have a blog post on that here in case it’s relevant: http://sacramentoappraisalblog.com/2014/06/17/is-it-a-second-unit-or-an-accessory-dwelling/
I will say it’s not always easy to figure out what a property is, so an appraiser is going to have to do research and make a judgment call. In my mind the most critical thing is how value is handled. Is one appraiser not accounting for the value of all the structures here? That’s the critical question.
Ryan,
My wife and I are in the process of negotiating the purchase of a home with a detached in-law quarters. The 440 square foot structure is detached from the home and actually connects to the garage. It was originally the sales office for the neighborhood in the late 1960s. The structure has a bathroom, living area, and bedroom. It has it’s own HVAC system, but water is tied to the main house. To our knowledge, there are no other homes in the neighborhood that have a similar quarters. How much of discount off the appraised value/square foot would an appraiser take when valuing such an improvement?
Hi Andy. Thanks for reaching out. I appreciate hearing about your situation. There really isn’t a standard discount because it’s all about what buyers are willing to pay in your market. I would hope there would be some examples in the neighborhood – even if they are old. Or maybe there are some examples in competitive areas of town.
Keep in mind there isn’t always a discount for detached space technically because sometimes buyers will pay about the same for that space per sq ft that they might pay with the main house. I am not talking about the total price per sq ft of the entire purchase price, but just the amount buyers are actually paying for only the square footage. This post might help unpack what I mean a bit more. http://sacramentoappraisalblog.com/2015/05/19/how-to-avoid-one-of-the-biggest-value-mistakes-made-with-square-footage/
I bring this up because at times the market will enjoy the other structure at about the same level as what buyers are willing to pay for extra square footage. That’s what I found in the last appraisal I did with this scenario. The total price per sq ft of the entire value of the property was about $200, but when looking at the difference between sales in the market, it looked like buyers were willing to pay about $100 or so for extra square footage. In this case it looked like this number of $100 lined up perfectly with my in-law quarters. It would be easy to look at the situation and say there was a huge discount, but when we look at the in-law quarters as just square footage, the market paid about the same price as what they paid on the inside.
This is certainly not true in every case, and there are so many moving parts to figuring out the value here. I just wanted to bring this up though because it might look like there is a big discount if we look at a price per sq ft for the purchase at $200, but when adjusting at $100 for square footage in the neighborhood, it really isn’t a discount at all if we discover value is about the same for the detached structure.
All things considered, I do think generally buyers might pay a little less for space outside, but there is no hard-and-fast rule to apply to every market, property type, or price range.
I hope that was not too much. Let me know if that makes sense or if I’m just babbling.
Thanks, Ryan. Your response is very helpful. We’ll definitely take the extra square footage example into consideration in our negotiation.
Thanks Andy. It’s always a bit interesting to value accessory units. There are so many factors to consider. A colleague just taught a class about them a few days ago. It was interesting to see his example of a $75,000 ADU (accessory dwelling unit), though this was a 1.5M property, which means it was really only about 5% of the total value of the home. Agents in his market really thought the unit was worth anywhere from about 40-100K. Part of it comes down to the size of the main house too as it can be a huge asset if the main house is smaller. But if the main house is enormous, it might not sway value as much. Here is another post I wrote about tips for valuing an accessory dwelling. Just an FYI in case it matters. I appreciate the way you are thinking through this: http://sacramentoappraisalblog.com/2016/10/05/how-to-figure-out-what-an-accessory-dwelling-is-worth/
I think we are going to hire an appraiser so we have some hard evidence to show the homeowner. The square footage of the home is over 2,600 square feet and this ADU is only 440 square feet. Also, the HOA prohibits the lease of individual rooms in this neighborhood. I think we have a good case that the ADU is not worth much. I’ll get back in a few weeks with the appraiser’s results. Thanks for your help – this is very educational!
Sounds like a good idea Andy. I will say homeowners can overstate value at times for the ADU – especially when owners have built the ADU. I recall doing an appraisal on a property where the extra unit could only be rented to a family member. That makes the extra unit less valuable because it’s really not all that marketable. At times it seems like ADUs are a bright and shiny object that we think will add tremendous value. That’s not always the case. At the same time if an appraiser gives a $10,000 value adjustment when a unit rents at $1,000 per month, that sounds very iffy because you’d think the market would pay far more than that.