A home with an accessory dwelling unit with a for-sale sign
Illustration by Lanette Behiry/Real Estate News; Shutterstock

How the rise of ADUs is creating new opportunities for agents 

As extra dwelling units become more mainstream, agents can market them as both a revenue source and a lifestyle.

February 20, 2024
5 minutes

Key points:

  • Housing inventory and affordability remain problems in the U.S., but new rules are making it easier to add accessory dwelling units to properties.
  • More baby boomers are building ADUs for their own use, letting younger families occupy the main house.
  • ADUs can present new marketing opportunities for agents, but due diligence is important.

Marketing a home that has an accessory dwelling unit comes with its challenges, but some agents see it as an opportunity to bring in more buyers.

That's the case for Shawn Luong, an eXp agent, consultant and video blogger in Covina, California. Luong is a big fan of building wealth through real estate, and he sees ADUs as one way to help with what is becoming the greatest wealth transfer in history, from baby boomers to younger generations.

"With so many baby boomers retiring every day, there needs to be a plan for downsizing," Luong said. "And this (ADUs) is a great opportunity."

Regulatory changes opening the door for more ADUs

Freddie Mac estimates the U.S. had 1.4 million legal ADUs in 2020, with half of them in California, Florida, Texas and Georgia. And the pace of ADU completion appears to have quickened nationwide:

  • The Seattle Times noted that the city had more permits issued for ADUs than single-family houses in 2022. There were nearly 1,000 ADU permits issued in Seattle in 2022, up from 280 in 2019.

  • After passing some legal reforms, the number of ADUs completed annually in California rose from 5,852 in 2019 to 17,460 in 2022, according to the Cato Institute.

  • Nationally, the number of ADUs is growing at a rate of 9%, or about 100,000 per year, according to a 2021 Porch.com report.

The Porch.com report listed Los Angeles as having the most ADUs, with 12% of all active listings of properties with ADUs across the 500 biggest cities in the U.S. Los Angeles was followed by Portland (4%) and Houston (3%). 

In most of the country, ADUs cannot be sold as individual units. But that's changing in California, where the passage of Assembly Bill 1033 allows homeowners to sell an ADU separately, much like a condominium. That rule went into effect at the beginning of 2024, but cities and counties need to opt in before homeowners can take advantage of it. Seattle also has some rules that allow for a detached ADU to be sold as a condo.

As more state and local governments make it easier for homeowners to build (and sell) ADUs, that could help municipalities tackle inventory shortages. 

ADU marketing strategies

For now, most ADUs must be sold as part of the main house and property, which can present some challenges and opportunities for agents.

Among the challenges, Luong said, is financing. Lenders may have a tough time figuring out the value of a property that lacks comparables in the area.

And agents may need to adjust their marketing strategies. Positioning an ADU as a revenue opportunity can attract some buyers, but Luong has found that promoting the intergenerational living possibilities also can bring in clients.

With affordability being such an issue these days, first-time buyers or those with young families often rely on parents or older generations for help. One scenario Luong is seeing is retired couples helping their adult offspring purchase the property and the retirees moving into the ADU.

"It's a good option because it allows families of different generations to be close, but not too close," Luong said. 

Marketing an ADU property with families in mind can appeal to buyers who don't like the idea of renting an ADU to strangers, said Redfin Chief Economist Daryl Fairweather.

"Families can also share other resources and responsibilities such as child care, which helps overall living costs as well," Fairweather said.

Agents should consider marketing ADUs as a lifestyle, rather than just an extra building, said Ileana Schinder, a residential architect in Washington, D.C., who spoke about the rise of ADUs at the National Association of Realtors NXT event in November. 

Along with the multigenerational families option, ADUs also can be a good fit for single parents and unrelated, aging adults, Schinder said.

Opportunities for agents as ADUs become mainstream

With ADUs increasing in popularity, agents should be thinking of ways to incorporate the trend into their business. 

During her presentation at NAR NXT, Schinder said she believes ADUs will be as common as a garage within the next decade. 

While the price of land and availability are big drivers for ADU construction, Schnider sees family needs or rental income as additional factors.

"I see it based more on how open-minded people are at integrating the space they have and what they need," Schinder said, noting that homeowners younger than 60 are more open to the idea of ADUs because they tend to view a property as an investment.

As buyers become more aware of ADUs, buying habits could change. Fairweather pointed out that a buyer who wants to build an ADU for a family member might be willing to pay a higher price for a home with a large yard, for example.

"Over time they (ADUs) will become more popular as homes turn over," Fairweather said.

ADUs require some extra due diligence

Before the property goes up for sale, Schinder stressed that agents need to make sure the ADU can function independently from the main house if they plan to market it as a separate dwelling. While there can be shared amenities such as the backyard, storage or some infrastructure, the ADU needs to have its own private entrance and access to public roads.

To deal with the problem of a lack of comparables, which makes it harder to price a property with an ADU, Schinder suggested a variety of strategies, such as calculating the price per square foot or using the number of bedrooms as comparable factors. If a former garage is now a one-bedroom ADU, agents might use a one-bedroom apartment unit as a comparison.

And, of course, it comes down to doing one's homework.

"It is a little challenging for an agent that has not sold, or bought or developed an ADU themselves," Luong said. "But for homebuyers, it provides so many more options at a time when inventory is low."

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