Real Estate Appraisal Blog

Accessory Dwelling Appraisals: Everything You Need to Know

Wed, Oct 05, 2022 at 12:00PM

Accessory Dwelling Appraisals: Everything You Need to Know

If you're considering adding an accessory dwelling to your property, there's a good chance you're interested in the impact it could have on your property value. This consideration is especially important if you are taking out a loan or refinancing your mortgage to add an accessory dwelling. 

Before getting into the details of how appraisals work for accessory dwellings, here’s a look at what exactly an accessory dwelling is and how it can affect the value of your property:

What Is an Accessory Dwelling?

An accessory dwelling is a second home, typically smaller than your primary house. It can serve as a rental property, home office, guest house, or mother-in-law suite. 

You can build an accessory dwelling unit (ADU) on top of your garage or in an existing garage space. In some cases, it may be placed on the same lot as your main house and connected by an indoor walkway/hallway or outdoor deck and patio combination.

How Are Accessory Dwelling Appraisals Performed?

There’s no rule of thumb on how to appraise ADUs. Your Ormond Beach property appraiser can use two main approaches:

Market-Based Approach 

With this approach, the appraiser determines the value of the accessory dwelling structure by comparing it with similar properties within your neighborhood with ADUs. This method is commonly used for private-use ADUs such as a granny flat or mother-in-law suite. 

Income-Based Approach 

In this approach, your appraisers will use the current value of the addition depending on the income you expect to generate from it. The appraisal is typically for rental units, taking into account the amount you earn alongside other comparable rates near you. 

What Factors Will the Ormond Beach Property Appraiser Look at?

Coming with a fair valuation of your property will push the Ormond Beach property appraiser to consider several factors, including:

  • Comparable properties in your area
  • The square footage of the ADU
  • Number of bathrooms
  • Condition of the ADU
  • Heating and cooling 

The final appraisal scope may vary from one appraiser to the next. Consult with different appraisal companies to determine the checklist they use. 

Back to Normal?

There is no doubt the expansion phase Volusia County experienced from 2013 – 2021 is levelling off.  However, unlike the recession from which we were recovering prior to that, inventory levels are stable and there are few signs of over-building though some oceanfront projects are questionable. 

Higher mortgage rates will cool the market, but don’t expect median prices to drop significantly.  Average “Days on Market” for residential listings is still below 90 days.   Construction materials and labor prices have risen 30%+ in the last 3 years and supply chain issues remain.  

Prior to 2009, average mortgage rates had never been below 5.9%.   The average rate was 8.05% in 2000.  Prior to the Great Recession, banks offered Certificate of Deposit accounts ranging from 4% - 6%. Savers get a reasonable “safe” rate of return.  There was an alternative to the stock market.  That’s the way it was before the Fed began printing money in 2009 – going into overdrive in 2020.  Now they want it back – in the form of higher rates and selling off the securities on its balance sheet.  So, we hope for a relatively mild recession.

Expect things to get back to normal. 

Appraising Your Accessory Dwelling

If you’re thinking about building an accessory dwelling, it’s important to keep in mind how this will impact your property value. Your appraiser can use an income-based or market-based approach. 

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