Buying a Salt Lake County Home With an Accessory Dwelling Unit: What to Verify Before You Offer

Can you buy a Salt Lake County home with an accessory dwelling unit and use it as a rental? Sometimes, but it depends on the city the home sits in, on whether the unit was permitted and built to code, and on what your lender will count. A second kitchen and a separate door do not make a unit legal. You verify that before you write an offer, not after.

An accessory dwelling unit, or ADU, is a second living space on the same lot as the main home. It can be a finished basement apartment, a unit over the garage, or a small separate cottage. Salt Lake County has many homes with some version of this, and the listing photos rarely tell you whether the unit is legal.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. This guide is the checklist I would walk a buyer through, in the order I would do it.

It is general education, not legal or tax advice. Each city sets its own ADU rules, so the city's planning office has the final word on any specific address.

A legal ADU has been approved by the city and built under permits. A finished basement with a kitchen is simply a finished basement that someone added a kitchen to. The two can look identical on a walk-through.

Cities in the county, from Murray to Sandy to South Jordan to Salt Lake City, each write their own rules for who may rent an accessory unit, whether the owner has to live on the property, how many parking spaces are required, and whether the unit needs a registration or a license. Some cities allow internal ADUs broadly. Others restrict them to certain zones. The only way to know is to ask the city for the address in question.

Here is what separates the two:

• Permits. Was there a building permit for the finish work, the kitchen, the added bathroom, and any electrical or plumbing changes? Was it closed out with a final inspection?
• Egress. Does every bedroom in the lower level have a code-compliant exit window or door? This is a safety item, and it is one of the most common problems in older basement finishes.
• Separate systems. Does the unit have its own smoke and carbon monoxide alarms, adequate ventilation, and a safe heating source?
• City registration. If the city requires the unit to be registered or licensed to be rented, is it?

Start with the listing and the seller disclosure. Then go to the source.

• Read the seller disclosure carefully. It asks about additions, finished space and work done without permits. Compare the answers to what you see in the house. Our guide to Utah seller disclosure forms explains what the form covers.
• Call the city's building or planning office. Ask what permits exist for the address and whether any were left open. Ask whether an accessory unit is allowed on that lot and whether this one is registered.
• Ask the seller for the paperwork. Permits, final inspection sign-offs, and any rental registration. A seller who finished the space properly usually kept these.
• Ask the inspector to look at the unit as its own space. Smoke alarms, egress windows, water heater and furnace clearances, and electrical panel labeling. See what to expect during a home inspection in Utah.
• Keep your deadlines in mind. City offices do not always answer in a day. Ask for the records early in your due diligence period, not on the last day of it.

If the work was done without permits, that does not automatically end the deal. It changes what you are buying: a house with a finished basement, not a legal rental. It may also affect price, financing and insurance, so ask about all three.

A legal, registered ADU may bring rental income and a flexible living arrangement. An unpermitted one may bring a bill: bringing the space up to code, permit fees, and in some cases removing the kitchen.

Price the house on what you can safely count on. If the unit is not legal, value it as extra living space for your own use, and treat any rent as a bonus you cannot rely on. Look at recent sales of similar homes with and without finished lower levels, and compare on square footage that is permitted and finished. Our home valuation page explains how comparable sales are used.

Two other costs deserve a number before you offer:

• Utilities. Is there one meter or two? If there is one, who pays for what, and how would you split it with a tenant?
• Insurance. Tell your insurance agent the unit exists and whether you plan to rent it. Some policies treat rental use differently, and a claim in an unreported unit can get messy.

Do not assume the rent will help you qualify. Lenders have their own rules for counting income from a unit in the home you buy, and those rules vary by loan program. Some programs count a share of documented rent. Others ask for a lease, a rental history, or an appraiser's rent schedule. Some will not count unpermitted space at all.

A lender may also ask the appraiser to describe the unit. An unpermitted second kitchen can lead to the space being left out of the square footage the appraiser counts, which can affect the value your loan is based on. That is one reason to talk to a lender before you make an offer on a home that is priced as a rental property. For the basics, read how to get pre-approved for a home loan in Utah.

If you plan to use the rent to afford the home, ask your lender, in writing, exactly what it will count and what documents it needs. Then build your budget on the lower number.

• Believing the listing. "Mother-in-law apartment" and "income potential" are marketing phrases, not permits.
• Counting rent you cannot legally collect. If the city does not allow the rental, your budget has a hole in it.
• Skipping the city call. Ten minutes with the planning office can answer what a month of guessing cannot.
• Ignoring egress and safety. A basement bedroom with no safe way out is a liability for you, whether or not anyone rents it.
• Not talking to the insurance agent. Surprises about coverage are worst after a loss.
• Waiting until the last day of due diligence. Records requests take time. Ask for them in the first few days.

Here is a typical example, not a specific client. A buyer finds a home in Murray with a finished basement, a separate entrance and a kitchenette. The listing calls it an apartment. The buyer likes the idea of renting it to help with the payment.

Before offering, the buyer asks the seller for permits and calls the city. The city has a permit for the basement finish but never closed it out, and the kitchen was not on the permit. The unit is not registered for rental.

Now the buyer has facts. The buyer can offer based on the home as a house with a finished lower level, ask the seller to pull a permit and finish the inspection before closing, or walk away. Each of those is a clear choice, made before earnest money is at risk. For more on how that deposit works, see how earnest money works in Utah.

Put these questions in writing. A seller's honest answer is useful. A seller's refusal to answer is useful too.

• Was the lower level finished with permits? Can you share them?
• Has anyone ever rented the unit? If so, for how long and under what lease?
• Is the unit registered with the city, if the city requires it?
• Are there separate meters or shared utilities?
• Has there ever been water in the lower level? How was it fixed?
• Are any items in the unit included in the sale, such as appliances or furniture?

If a tenant lives in the unit now, you also need to know whether the lease continues after closing and what the tenant is owed. Our guide on selling a tenant-occupied home in Utah shows what sellers must handle, which tells a buyer what to ask.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. I walk buyers through a home like this one question at a time: what is permitted, what is not, what it would cost to fix, and how that changes the price. I do not guess about city rules. I help you ask the city and read the answer.

If you are comparing several homes, the buying a home page explains how we work through offers, inspections and deadlines. If your goal is rental income, start with our page on investment property.

Is a basement apartment automatically legal if the house has a separate entrance?

No. A separate entrance is a feature of the building. Legal status comes from the city's approval and permits.

Can I add an ADU after I buy?

Often, depending on the city and the lot. Ask the planning office about zoning, parking, owner-occupancy rules, and permit costs before you count on it.

Will an unpermitted unit stop me from getting a loan?

Not always, but it can affect how the appraiser describes the home and what a lender will count. Ask your lender early.

Can I ask the seller to pull permits before closing?

Yes. You can make it part of your offer or a counter. The seller decides whether to agree, and timelines matter.

Who pays to fix code problems the inspector finds?

That is negotiable. It depends on your contract, your due diligence period and what the seller agrees to.

Send me the address, and I will help you build the question list for the seller and the city before you spend money on an inspection. Contact Charisse here.

This article is general education and does not replace advice from the city, an attorney, a tax professional or a lender about your specific situation.