The Unpermitted ADU and the Drive-By Deadline

No - not for the as-is value. A hypothetical condition assumes something contrary to what is known to exist. Using one to assume away a known legal defect would make the as-is value misleading, because the as-is value must reflect the property as it actually exists, including the risk that the unit is unpermitted and the uncertainty and cost of legalizing it.

• The as-is value should treat the converted garage as an unpermitted improvement. Analyze how the market reacts: do buyers pay for it, discount it, or demand a cure? Consider the cost and risk of obtaining the conditional use permit and any code compliance work.
• The subject-to value can use a hypothetical condition that the permits are obtained and the unit is legal, but it must be clearly disclosed and the appraiser must state the assumption's effect on value.
• The distinction matters: an extraordinary assumption is used for something unknown that the appraiser believes is true; a hypothetical condition is used for something known to be contrary to fact. The unpermitted status is known, so an extraordinary assumption will not cure it.
• Both conclusions must be reconciled and reported so the client can see what each number assumes.

The legal-permissibility test comes first. Highest and best use requires a use that is legally permissible, physically possible, financially feasible, and maximally productive. Because the ADU lacks the required conditional use permit, it is not legally permissible as a separate dwelling unit.

• The income approach built on $1,450 per month is therefore suspect as a direct capitalization of a legal use. The appraiser must not simply add the rent as if the unit were legal.
• The likely highest and best use is single-family residential. The converted space may contribute as bonus area, storage, or a quasi-living space that the market values, but that is a market reaction to the improvement, not a legal second unit.
• If local buyers routinely pay extra for unpermitted units, that reaction belongs in the sales comparison analysis as a market-derived adjustment, supported by evidence - not as a legal use conclusion.
• The appraiser should state why the income approach was or was not used, rather than silently capitalizing an illegal rent.

Scope must be sufficient for credible results; the deadline does not excuse an inadequate scope. A drive-by can be adequate for a simple property, but this property has a material legal and physical issue that cannot be resolved from MLS photos alone.

• The appraiser should either upgrade to an interior inspection or clearly disclose an extraordinary assumption about the interior condition and the unit's condition, and explain its impact.
• The report must state the extent of the inspection, the data sources (MLS photos, owner statements, county records), and the effect on credibility. If the appraiser did not inspect the interior, the certification must say so.
• The 48-hour turn is a business constraint, not a scope justification. If the client will not permit a scope adequate to the risk, the appraiser should decline.
• The appraiser must not describe the assignment as an interior inspection or imply verification that did not occur.