Selling a Davis County Home With a Basement Apartment: What Sellers Should Sort Out Before Listing

Start by finding out what the apartment legally is, then price and market the house based on that answer. A basement apartment can be a selling point, a pricing question or a problem to fix, depending on whether it was permitted, whether a tenant lives in it, and whether the city allows a second living space at that address.

The mistake I see most often is a seller advertising the apartment as extra income before checking any of those facts. Buyers, lenders and appraisers will check them. It is far better for you to know the answers first and decide how to present the home.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. I help Davis County sellers sort this out before the house goes live, because the answers change both the price and the buyer pool.

The answer depends on your city. Utah law has made it easier to have an internal accessory dwelling unit in many places, but cities still set their own rules about permits, parking, owner occupancy and registration. I am not an attorney and I cannot tell you what your city allows. Your city's planning or building office can, and you should ask them before you list.

Things to find out:

• Does the city require a permit or a registration for an internal apartment, and was one issued for yours?
• Does the unit have its own entrance, a kitchen, a bathroom and proper exits?
• Did the work pass inspection when it was done?
• Are there any recorded conditions, such as a requirement that the owner live on the property?

If you inherited the home or bought it with the apartment already in place, ask whoever sold it to you for any paperwork. If there is none, that is still useful to know. You can decide with me whether to correct it, disclose it and price around it, or market the home without counting the apartment at all.

It can add value, but not automatically. Appraisers look at what is permitted and what comparable sales support. An unpermitted unit may be left out of the finished square footage. A permitted unit with its own kitchen may be valued differently from an ordinary finished basement, but only if the appraiser can find recent sales of similar homes to compare it with.

If very few homes nearby have a legal apartment, the appraiser has less to work with, and the value they assign can land below what you hoped. Buyers who rely on a loan are bound by that appraisal.

For that reason, I do not build a list price by adding an assumed rent multiple to the main house value. I start with what similar homes have sold for and then talk about how the apartment fits. My approach to pricing is covered in How to Price Your Home Right in Davis County.

Then you are selling a home with a tenant in it, and the lease governs what you can do. Showing the apartment requires proper notice under the lease and Utah rules. The buyer will want to know the lease terms, the rent, the deposit and whether the tenant plans to stay.

There are two ways this usually goes:

• The buyer wants to keep the tenant. They will ask for a copy of the lease and the payment history, and the lease transfers with the property.
• The buyer wants the space for themselves. Then the timeline depends on the lease and on the notice the law requires you to give. Build that into your closing date before you accept an offer.

I wrote a full guide on this: How to Sell a Tenant-Occupied Home in Utah. If your tenant is a relative or a friend without a written lease, put the arrangement in writing now. Buyers hesitate when an occupant's rights are unclear.

Utah sellers complete a disclosure about the condition of the property, and a basement apartment touches several lines on it: additions and alterations, rental use, plumbing, electrical and any known problems. Answer honestly and completely. A disclosure that skips the apartment can create a legal problem for you after closing.

You do not need to be a building expert to answer. If you do not know whether work was permitted, say so. Saying "I do not know" is better than guessing. I explain the form in Utah Seller Disclosure Forms.

Work through this order. It saves time and surprise:

• Check with your city about the status of the unit.
• Gather permits, final inspection paperwork, the lease and recent rent records.
• Decide whether any small corrections are worth doing before the listing, such as a missing smoke alarm or a blocked window.
• Talk with me about how to present the home: as a house with a finished basement, as a house with a legal apartment, or both, depending on the facts.
• Check the timing with your tenant before photos and showings begin.

Then we price the home using sold comparables, build a net sheet so you can see what you keep, and write the listing so it says only what you can support. My guide on the net sheet is here.

• Advertising income potential without proof of rent or permit status.
• Letting a tenant or buyer assume the unit is legal without checking.
• Promising a buyer that the tenant will leave before there is a notice in place.
• Pricing the house by adding the rental income to the value of the home.
• Showing the apartment without proper notice, which can strain the tenant relationship and the sale.

Each of these can slow a sale or reduce what a buyer is willing to pay. Clear paperwork and honest marketing usually protect your net better than a high headline price.

Here is a typical example, not a specific client. A homeowner in Davis County has lived upstairs for years and rented the basement to a tenant on a month-to-month basis. The apartment has a kitchen and a separate door. The owner is not sure whether the city approved it.

The owner checks with the city, learns what was and was not filed, and gives the tenant proper written notice of the sale plans. With that information, we decide to market the house with the basement described accurately, price it from sold comparables, and show the lower level at set times.

The buyer's lender appraises the home, the appraiser counts what can be supported, and the sale closes without a surprise because nothing was left to be discovered late. That is the goal.

Can I sell my home if the basement apartment is not permitted?

Yes. You can sell, but you should disclose what you know and price with the risk in mind. Talk with your city and your agent first.

Will my buyer be able to keep renting the apartment?

That depends on the lease, the city's rules and the buyer's loan type. Some loans have limits on rental income. Your buyer's lender can answer that.

Do I have to evict the tenant before I sell?

Not necessarily. The lease can transfer to the buyer. If the buyer wants the unit empty, the notice rules in your lease and Utah law control the timing.

Will the apartment raise my sale price?

It can, but only if it is supported by permits and by comparable sales. Do not count on a rent multiple.

Should I talk to an attorney?

If the facts are unclear or a tenant dispute exists, yes. I can explain the real estate process, but I do not give legal advice.

If your house has a basement apartment and you want a clear plan, contact me here. I will help you sort out the facts first, so the listing says only what you can stand behind.