Navigating Appraisal Requirements for Properties with Illegal ADUs

When purchasing or refinancing a home with an illegal accessory dwelling unit (ADU), understanding the appraisal requirements is crucial to ensure a smooth transaction. We work with borrowers and lenders to navigate these unique scenarios while maintaining compliance with lending guidelines.

Can a Property with an Illegal ADU Qualify for a Mortgage?

Yes! MortgageDepot accepts one-unit primary residences with illegal ADUs, provided the appraisal meets specific criteria. Here’s what you need to know:

Key Appraisal Requirements for Illegal ADUs

1. Comparable Sales with Illegal ADUs

• The appraisal must include at least two comparable sales of properties that also have illegal ADUs.
• These comps should be from the same market area as the subject property to demonstrate marketability.

2. Noncompliance with Local Zoning

• The ADU must be noncompliant with local zoning laws (i.e., unpermitted or not meeting current regulations).
• The appraiser should note this in the report and confirm that the illegal ADU does not negatively impact marketability.

3. Marketability & Functional Utility

• The appraisal must show that the illegal ADU does not deter buyers or lenders, meaning it is still considered functional and marketable in the area.
• If the ADU poses safety risks or significantly detracts from value, additional conditions may apply.

If you have questions about ADUs, appraisals, or loan eligibility, contact us for more information.