Can you include it in the square footage? I get questions like this almost every week. Is it okay to count an accessory dwelling in the living area? What about a pool house? How about a man cave or she shed? Let’s talk about this.
The straight dope: It’s tempting to lump something else in the backyard into the square footage, but that’s not appropriate per ANSI measuring standards. Basically if you have to walk outside of the house into something else that is not directly accessible to the house, we’re really dealing with something that isn’t considered to be a part of the main house. So we call that something else a studio, casita, accessory unit, pool house, she shed, or whatever. It’s just not the main house, which is why it’s not included within the square footage.
New video: I made a video to talk through some things to watch in the fall market. Enjoy if you wish (or watch here).
An Example: If you have a house at 2,500 sq ft and an accessory unit at 1,200 sq ft, it isn’t a 3,700 sq ft house. No, this is fundamentally a 2,500 sq ft house with something else. Could it be worth the same amount as a 3,700 sq ft house? Maybe. But if we only compare this type of home with other 3,700 sq ft units, we haven’t really proved what a 2,500 sq ft house with a 1,200 sq ft accessory unit is worth. The best comps will be other homes with accessory dwellings, right? Heck, maybe it’s worth even more. But we’ll never know unless we find the right comps to tell the story of value. The quick “comps” are all 3,700 sq ft, but those might not be the best representations of value.
The problem: If a property is priced based on a lumped square footage, what happens when the appraiser gets out there and needs to use smaller-sized comps that are consistent with the actual size of the main house? Is there going to be a difference in value?
The truth: It’s not an easy pill to swallow when the appraiser doesn’t include the extra space in the square footage, but just because it doesn’t count in the square footage doesn’t mean it doesn’t count in the value.
But they’re lumped together in MLS: I know, this happens all the time. A property will be sold with a lumped square footage of the main house and the pool house. We even see this happen at times in Tax Records. Let’s remember a few things: 1) The way a property is marketed doesn’t change what a property is; 2) As a non-lawyer I wonder if there is increased liability for representing a home at a larger size than it is (hopefully there is an asterisk that clarifies what the square footage represents); 3) The appraiser is very likely going to treat the two areas differently instead of lumping them together.
My advice? Instead of quickly pulling larger “comps” right away, try to isolate features such as a pool house, accessory dwelling, or outbuilding to determine what they’re worth in addition to the value of the main house. In other words, what is the main house plus the extra thing in the backyard worth? That’s the math market equation we have to figure out and it can be done by pouring through lots of data. Finding a few examples of homes that have sold with that feature is the ideal so we can try to discover what that feature commanded in terms of value. Sometimes we might even look through years of sales too. Remember we might not use really old sales as comps, but we can certainly use them for research.
Resources:
Q&A on accessory dwellings
Tips for valuing ADUs
Using older sales is sometimes the best option
Can a basement be considered square footage?
Anyway, I hope that was interesting or helpful. Thanks for being here.
Questions: Any stories to share? What follow-up questions or insight do you have? Did I miss anything?
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This is where it gets interesting, so bear with me. Noticeably larger homes have shown up in sales stats from June to August this year, but a big part of that comes down to buyers focusing more heavily on Placer County & El Dorado County. In fact, over the past three months compared to last year Placer County sales volume is up 16.8% and El Dorado County volume is up 31.5%. Why does this matter? If you didn’t know, monthly sales in these two counties are routinely 400+ square feet larger in size than Sacramento County (mostly due to having newer homes through the years that were built larger). This data does NOT include brand new homes currently being sold from builders – only MLS sales. Anyway, when we consider why the home size in the region has jumped so much lately, a huge reason looks to be buyers flocking to these two counties in search of more space.
An army of support: While I was in the hospital a GoFundMe was started by my friends Erin Stumpf and Joe Lynch. I’m honestly a guy who hates accepting help. I would never in a million years have asked for something like this because I always want to be the giver. So it was humbling to see my face online and to have my colon become internet famous (haha). I received a text message basically saying, “We’re going to do this and your peeps are going to take care of you.” And that’s what happened. Everyone, I cannot put into words how grateful I am for you carrying my family during this time. As the hospital bills start rolling in and I haven’t had income for over two months, your generosity has been a tremendous blessing. It’s frankly taken off some pressure and given me space to adequately heal. I still have lots of individual thank yous to say and I will get to those over time, so please be patient. But for now I want to publicly thank everyone for your support. I have no words to express how deeply grateful I am.
