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?
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