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A recently enacted California law, AB 1033, effective October 2023, has sparked my enthusiasm. This legislation allows homeowners with an Additional Dwelling Unit (ADU) to sell it as a separate property.
Here’s how they work: An ADU can take the form of a guest house, backyard cottage, or granny flat, available in various configurations like a separate structure, on top of a garage, or as a distinct part of the home. Now, homeowners can sell the ADU independently from their main residence.
There are some important regulations. The sale must occur similarly to a condo, requiring a mechanism for maintaining common areas and adherence to Homeowners Association rules and regulations; however, this option is only available in select cities and will take effect in January 2024. Here’s why I find this development exciting:
1. Enhanced flexibility. Homeowners gain more flexibility with one of their significant assets, potentially creating a nest egg for retirement by selling the ADU.
2. Market trends. Similar laws in Oregon, Washington, and Texas have seen homeowners creating an ADU, moving in, and selling the main home, offering flexibility and potential downsizing.
3. Impact on housing. This law could contribute to addressing affordable housing issues and the shortage of inventory in California, providing buyers with an opportunity for a single-family residence purchase.
4. Financial considerations. ADUs in other states have fetched substantial amounts, ranging from $500,000 to $800,000, providing sellers with a significant financial opportunity.
While this development is still unfolding, it presents strategic possibilities. As we navigate the evolving landscape, we’re here to assist you in creating a game plan tailored to your needs. Just call or email us with any questions. We look forward to hearing from you!
