Chief Appraiser Says
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What "Guest House" Actually Means
When we use the term "guest house" in an appraisal, we're talking about what the guidelines formally call an Accessory Dwelling Unit or ADU — a separate living space that includes its own kitchen, bedroom, and bathroom facilities, either built as part of the main house or sitting detached on the same property. We have to determine whether the property should be classified as a single-family home with an ADU or as a two-family dwelling, and that decision drives how we report everything else. If it legally qualifies as an ADU, we measure and report its living area separately from the main house, document whether it can legally be rented out without restrictions, note who's living there now, and include details of any lease agreements. We also have to photograph both the inside and outside of the ADU and can optionally provide a market rental opinion if the property's highest and best use is determined to be a single-family dwelling with an ADU, the unit is legally rentable without restrictions, and we can credibly support a monthly rental value based on comparable rental data.
Straight from UAD 3.6/URAR (FNMA), HUD/FHA Single Family Handbook 4000.1, VA Lenders Handbook (Pamphlet 26-7), and Fannie Mae Selling Guide — nothing added.
When we use the term "guest house" in an appraisal, we're talking about what the guidelines formally call an Accessory Dwelling Unit or ADU — a separate living space that includes its own kitchen, bedroom, and bathroom facilities, either built as part of the main house or sitting detached on the same property. We have to determine whether the property should be classified as a single-family home with an ADU or as a two-family dwelling, and that decision drives how we report everything else. If it legally qualifies as an ADU, we measure and report its living area separately from the main house, document whether it can legally be rented out without restrictions, note who's living there now, and include details of any lease agreements. We also have to photograph both the inside and outside of the ADU and can optionally provide a market rental opinion if the property's highest and best use is determined to be a single-family dwelling with an ADU, the unit is legally rentable without restrictions, and we can credibly support a monthly rental value based on comparable rental data.
Straight from UAD 3.6/URAR (FNMA), HUD/FHA Single Family Handbook 4000.1, VA Lenders Handbook (Pamphlet 26-7), and Fannie Mae Selling Guide — nothing added.
Read the actual documents:
→ HUD FHA 4000.1 Single Family Housing Policy Handbook (Chief Appraiser Document Library)
→ VA-Lender-Handbook (Chief Appraiser Document Library)
→ UAD 3.6 and Forms Redesign: Inspection and Reporting Tips (2025-10-21) (official agency copy)
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© Copyright Notice: © 2026 Fannie Mae. Excerpts shown for research and reference only. Full document available at selling-guide.fanniemae.com. Reproduction restricted to Fannie Mae-approved lenders.
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Photos family room, dining room, all bedrooms, etc.) • Any recent updates, such as restoration, remodeling, and renovation, if present • Interior photos of Accessory Dwelling Unit…
UAD 3.6 / URAR (FNMA) · uad-photo-and-image-job-aid.pdf · Page 5
· View at official source (fanniemae.com/uad) →
Photos family room, dining room, all bedrooms, etc.) • Any recent updates, such as restoration, remodeling, and renovation, if present • Interior photos of Accessory Dwelling Unit (ADU) Functional Obsolescence Any photos or images related to this section that are not specified here may be provided. Outbuilding • Interior and Exterior photo(s) of Outbuilding • Standalone ADU Vehicle Storage • The photo must be included in the specific instance of the vehicle storage Subject Property Amenities • The photo must be included in the specific instance of the Amenity Overall Quality and Condition This section does not have any images associated with it. Highest and Best Use Any photos or images related to this section that are not specified here
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an accessory dwelling unit. 22.07.02 22.07.18 Location of ADU If Unit is an ADU is Yes for the subject or any comparable Required if Unit is an ADU is Yes Dwelling or Outbuilding…
UAD 3.6 / URAR (FNMA) · Appendix F-1 URAR Reference Guide v1.3.pdf · Page 247
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an accessory dwelling unit. 22.07.02 22.07.18 Location of ADU If Unit is an ADU is Yes for the subject or any comparable Required if Unit is an ADU is Yes Dwelling or Outbuilding • Structure Type Not on Report Yes 22.07.19 Structure Type: The type of structure that contains the ADU. • If the ADU is in a dwelling, “Dwelling” displays. 22.07.02 22.07.18 Location of ADU If Unit is an ADU is Yes for the subject or any comparable Required if Unit is an ADU is Yes, and the ADU is in an outbuilding Choose an allowable answer from 10.000 Unit Interior • Outbuilding Type 10.000 Yes 22.07.19 Outbuilding Type: The type of outbuilding that contains the ADU. • If
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(a) One-Unit Single Family Dwelling with an Accessory Dwelling Unit When the highest and best use analysis determines the Property to be a Single Family dwelling with an ADU, the…
HUD/FHA Single Family Handbook 4000.1 · HUD_FHA_4000.1.pdf · Page 845
· View at official source (HUD.gov — SFH Handbook 4000.1) →
· Last verified: 2026-10-10
(a) One-Unit Single Family Dwelling with an Accessory Dwelling Unit When the highest and best use analysis determines the Property to be a Single Family dwelling with an ADU, the Appraiser must: • provide a description of the ADU characteristics; • summarize the ADU’s market acceptance; • report the Gross Living Area of the ADU separate from the primary dwelling; • state whether the ADU can be legally rented without restrictions; and • report the current ADU occupancy and the relevant details of any known lease agreements. (b) Optional Accessory Dwelling Unit Market Rent Analysis The Mortgagee may request an opinion of the ADU market rent in the scope of work. The Appraiser may provide the ADU market rent only