Buying a home with an additional living area can make or break a deal. With the recent changes in laws in California related to accessory dwelling units (ADU), knowing the difference between the classification of a two-family property and an ADU is critical.
All of the agencies can look at a property differently based on how the appraiser classifies additional living area. The differences are important due to the wholesale lender pricing adjustments and required comps to support value as well as whether an agency will allow two-family properties. Much tougher than ADU. Also, some require additional assets as reserves to close the loan.
Agents - Use the below information as a way to help “qualify” your buyers with proper expectations.
DIFFERENT TYPES OF ADDITIONAL LIVING AREAS
Both ADU's and Two-Family properties can be Interior, Attached or Detached.
- INTERIOR - Typically a conversion of an attached garage, basement or attic space commonly known as in-law suites or apartments.
- ATTACHED - Typically a unit added to the main residence to the side or rear of the primary home or sometimes where a living space is added on top of an attached garage.
- DETACHED - Free standing structures that are separate from the home like a detached garage, breezeway or outbuilding. Typically referred to as a guest cottage, guest house, carriage house.
HOW TO TELL IF A HOME IS A SFR WITH ADU
If below describes your property it is MOST LIKELY an ADU.
- If unit used to be an attic, basement or garage was converted for purpose of providing living space to a FAMILY member.
- If detached unit is designed to look like primary home characteristics.
- The detached unit is smaller than the primary home.
- The additional living area DOES NOT have separate utilities.
- Zoning only allows primary home to be occupied by property owner.
- The market and neighborhood area conform to single family with ADU type homes and is customary for the area.
HOW TO TELL IF A PROPERTY IS A TWO FAMILY PROPERTY
If below describes your property it is MOST LIKELY a Two Family Property
- The unit has separate mailing address.
- The unit has separate utilities and meter.
- The unit has MORE THAN 2 bedrooms.
- Attached or Interior unit has its own private entrance.
- Zoning allows for two family unit properties.
- Zoning allows for additional units to be rented.
- The unit is currently and legally being used as a rental unit.
- The unit generates additional revenue in addition to rental income for parking or storage.
- The unit has been marketed as a two-family property in the past.
- The market and neighborhood area typically conform and are used as two family properties