Will an ADU Improve the Selling Price of Your Home?
Editor’s Note: This article recently appeared in the Los Altos Town Crier.
With the growing trend of accessory dwelling units (ADUs) due to relaxed laws and a need for more housing, homeowners often wonder if adding an ADU will significantly boost their home's value. When considering selling your home soon, it's crucial to identify the investments that will yield the highest return.
Should you add an ADU to maximize your home's selling price?
Here are some critical questions to consider:
Is an ADU appropriate for your lot?
Will it enhance the property's overall feel or make it seem cramped? Keep in mind, when selling, we are selling “space.”
Can an ADU be added without significantly impacting your privacy?
What are your goals and motivations for adding an ADU?
Your motivations for adding an ADU are important considerations.
If it's for personal use by family or friends, the impact on your space will be minimal. However, if your primary goal is to offer rental income potential for yourself or even for future buyers, the return on investment (ROI) may not meet your expectations. Build an ADU only if it meets your needs and you plan to use it.
ADUs vary widely in size, type, and placement.
Recently, I’ve seen them as small as 165 square feet or as large as 400+ square feet; some are attached to the primary home, some are detached, and some are located in the front of the house while others are at the back of the property. This variability makes it challenging to predict how an ADU will impact your home’s value.
Consider the buyer's perspective.
Some buyers use a home’s price per square foot as a key metric. If an ADU's square footage is included in the total, it lowers the price per square foot but can create false expectations about the home's size. The MLS does have fields to separate the ADU square footage from the square footage of the primary home, though they are not always used. The price per square foot can help buyers figure out a rough market value to gauge whether they are getting a good deal or possibly overpaying. To ensure clarity, I recommend Realtors list the primary home's square footage separately and highlight the ADU in the first few lines of the description. This lets people know that the square footage of the ADU is over and above the primary living space.
Opinions vary on whether an ADU increases your home's value.
If you have an ADU, use it as a selling feature. If not, potential buyers interested in rental income or additional space may prefer to build their own. The most important aspect is to present your home's square footage accurately and highlight the ADU separately to set the right expectations for buyers. What’s most important here is that the way your home is described in the listing sets the stage for a great experience when walking onto your property. This usually means clarifying upfront the square footage of the primary home while calling out the size of the ADU if there is one.
