Homes with ADUs: what to check before you buy in California

Why homes with ADUs need extra checks

A listing that says “ADU,” “guest house” or “income unit” is a description, not a permit. The difference matters for value. The Federal Housing Finance Agency found that the median appraised value of California homes with an ADU was $1,064,000 in 2023, against $715,000 for homes without one, among homes bought with Fannie Mae and Freddie Mac loans. FHFA warns the gap may reflect bigger lots and pricier areas, not the ADU alone. Either way, buyers pay for the second unit, so confirm you're getting a legal one.

This guide is for buyers. If you're selling, or want the appraisal and condo-sale rules in depth, read ADUs in real estate.

Houses with an in-law suite: ADU, JADU or just a room?

“In-law suite” isn't a legal term. In California it can be one of three things, and only the first two are separate legal units.

The City of San Diego's 31-day minimum rental is in its ADU code. Lenders use their own test: Fannie Mae counts a space as an ADU only if it has its own entrance, kitchen, sleeping area and bathroom, and a space you can reach only through the main house doesn't qualify. More on the terms in what an ADU is.

How to check an ADU is permitted

Ask the seller for the permit number first. Then look it up yourself; don't rely on a copy.

• City of San Diego. The city's Permit Finder map, launched in November 2023, holds records for more than one million permits back to 2003. Search by address, assessor's parcel number, project number or permit number. The city's Development Services records page also links its OpenDSD search, and explains how to request older records and plans, which aren't online.
• Unincorporated San Diego County (Ramona, Alpine, Fallbrook, Spring Valley and other areas outside a city). The county's Planning & Development Services uses Accela Citizen Access, where you can research permit history without an account.
• Other cities (Chula Vista, Oceanside, Escondido and the rest) keep their own records. Call or email the building department with the address.

What a permitted ADU looks like on the record

You want a building permit whose description matches what's there (“new detached ADU,” “garage conversion to ADU”), with a passed final inspection. In the City of San Diego the final inspection is the approval to occupy. Red flags: a permit that was issued but never finaled, a permit for a “garage” or “storage” building that now has a kitchen, or a square footage far smaller than the unit you're standing in.

What the seller must disclose

In most California home sales, the seller completes a Real Estate Transfer Disclosure Statement. For a house with an ADU, read these answers closely. The form asks whether the seller knows of:

• “Room additions, structural modifications, or other alterations or repairs made without necessary permits”
• “Room additions, structural modifications, or other alterations or repairs not in compliance with building codes”
• “Any zoning violations, nonconforming uses, violations of ‘setback’ requirements”

A “no” on all three for a home with an obvious garage conversion is a reason to check the permit record before you go further. The disclosure says what the seller knows, not what the city approved.

If the ADU isn't permitted

An unpermitted unit isn't automatically a deal-breaker. California has made legalizing older ones easier:

• AB 2533, now Government Code § 66311.7. For an ADU built before January 1, 2020, a city can't deny a permit to legalize it just because it breaks building standards or ADU rules, unless a fix is needed for health and safety. Impact fees generally don't apply. The City of San Diego explains its process in Information Bulletin 242.
• SB 13's enforcement delay, Health and Safety Code § 17980.12. If the owner of a pre-2020 ADU gets a notice to correct violations, they can ask the enforcement agency to delay enforcement for five years. The agency must grant it if correcting the violation isn't needed to protect health and safety. It can't approve new requests on or after January 1, 2030.

Neither helps with financing on its own. Fannie Mae will finance a home whose ADU isn't allowed by zoning only if the lender confirms it won't jeopardize an insurance claim and the appraisal uses comparable sales with the same kind of non-compliant use. The appraiser may give the unit little or no value, and you may not be able to count its rent.

Loans, appraisals and rental income

Your lender decides how the property is classified, and that drives the loan. Key points from Fannie Mae's rules:

• One ADU. Its definition allows one ADU with a one-unit home and none with a 2–4 unit property. California lets many lots have more than one ADU, so ask your lender early how it will classify the property.
• Rent can help you qualify. A lender can count rent from one ADU on a one-unit principal residence, capped at 30% of your total qualifying income. On a purchase it needs the appraiser's comparable rent schedule and, if a lease transfers to you, a copy of it.

The appraisal side, including how appraisers value the unit and why it usually isn't added to the house's square footage, is in our ADU real estate guide. For loan types, see ADU financing; for realistic rents, see ADU rental income in San Diego.

Buying a house with an ADU that's rented

A tenant in the ADU comes with the property. Get the lease, the rent history and any notices early, because the rules that protected the tenant under the seller can apply to you.

• Security deposit. California law requires the seller to either transfer the tenant's deposit to you or return it to the tenant with an accounting. Once you receive it, you have all the landlord's obligations for it. If the seller doesn't comply, you and the seller can both be liable to the tenant.
• Just cause (AB 1482). After a tenant has lived in a unit for 12 months, state law requires a legal reason, stated in writing, to end the tenancy. The law defines the owner to include a predecessor in interest. Owner move-in is a no-fault reason, with relocation equal to one month's rent. A single-family home where the owner lives and rents out no more than two units or bedrooms, including an ADU, is exempt.
• Rent cap. Increases are capped at 5% plus inflation, or 10%, whichever is lower, in any 12 months, through January 1, 2030. Housing with a certificate of occupancy issued within the past 15 years is exempt, which covers most newer ADUs.
• City of San Diego. The city's Tenant Protection Ordinance goes further. According to the Legal Aid Society of San Diego, no-fault relocation is two months' rent (three for tenants 62 or older or disabled), and for leases signed on or after June 24, 2023, owner move-in counts only if the tenant agrees in writing or the lease allows it. The owner-occupied single-family exemption carries over.

If you plan to live in the ADU or the house yourself, talk to a landlord-tenant attorney before you close, not after. Whether an exemption fits your purchase depends on facts the statutes don't settle for you.

ADU inspection checklist before you buy

A general home inspection may give the ADU a quick look. Ask your inspector to treat it as a second house, and check these yourself:

The last four rows are practical checks, not code requirements. If the unit is new, ask for the builder's warranty and the name of the licensed contractor who built it, then check that contractor's license.

Separate meters and utilities

Many ADUs share the house's electric, gas and water meters. That's legal, but it means you split bills with a tenant by agreement, not by meter. Adding a meter later isn't cheap: Snap ADU puts a separate SDG&E meter at $10,500 to $15,000. Separate meters also matter to lenders, because Fannie Mae weighs them, along with a separate address, when deciding whether a property is one unit plus an ADU or a multi-unit building. Ask the seller for a year of utility bills for each meter.

Property tax after you buy

Your tax bill won't match the seller's. Under Proposition 13, a property is reassessed to market value on a change in ownership, then can rise no more than 2% a year until the next sale or new construction. Buying a house with an ADU reassesses the whole property, ADU included. The County of San Diego says new owners will receive one or two supplemental tax bills on top of the annual bill, so budget for them.

If you add an ADU later instead, only the new construction is added to your assessment. That math, and the case for building rather than buying, is in what an ADU costs in San Diego. To build on a home you buy, compare verified ADU builders in San Diego and read California ADU laws first.

Common questions