Updated September 28, 2026
Yes, and it happens constantly in Los Angeles right now, because ADU approvals take long enough that ownership changes hands mid-process more often than most sellers expect. What matters is exactly where the permit sits — submitted, approved, under construction, or awaiting final inspection — because each stage transfers a different set of obligations, and each stage gets priced differently by a buyer's lender.
The single biggest mistake sellers make here is assuming an in-progress ADU adds value the same way a finished, rented one does. It usually doesn't, and sometimes it subtracts value instead.
Submitted, not yet approved. The buyer inherits an application, not an asset. If LADBS requests changes or the plans need revision, the buyer does that work, not you. Most buyers assign this stage close to zero incremental value, because approval isn't guaranteed and the timeline is unknown.
Approved, not yet started. This is worth more — the entitlement itself has value, since it removes uncertainty about whether the unit can be built at all. But it's still a plan set, not income. A buyer is paying for optionality, not cash flow.
Under construction. This is the riskiest stage to sell into. There's likely a construction loan to resolve, a contractor relationship to hand off or terminate, and an open permit that follows the building regardless of who owns it. Buyers discount hard here unless you can document exactly what's finished, what's outstanding, and what it costs to complete — the same documentation standard covered in the seller's disclosure package.
Built, awaiting final inspection. Nearly done, but not legally occupiable and not generating rent until it passes. Buyers will often close but hold back funds in escrow tied to final sign-off, rather than pay full value for a unit that isn't yet legal to rent.
A buyer might be willing to take a flyer on an unfinished ADU. Their lender usually isn't. Most purchase-money lenders will not count projected ADU rent in their underwriting until the unit is complete, permitted-final, and has a certificate of occupancy or equivalent sign-off. That means the building's income, for loan-sizing purposes, is calculated as if the ADU doesn't exist yet — which caps how much the buyer can borrow, which caps what they can offer you, regardless of how close to finished the unit actually is.
This is the mechanism that surprises sellers most: an ADU that's 90% done can still add nothing to your buyer's loan amount, because "90% done" and "finished" are treated identically by the lender until the last box is checked.
Whatever stage the permit is at, bring the actual paperwork — the approved plan set, the permit number and status from LADBS, and if construction has started, a contractor statement of completion percentage. Sellers who show up with a folder of documentation get priced on the real stage of the project. Sellers who describe it verbally get priced on the buyer's worst-case assumption, because that's the only defensible number a buyer's broker can underwrite to.
A completed, permitted, rented ADU is a straightforward value-add, and does adding an ADU increase my apartment building's value covers why it adds more value here than in most markets — new-construction units generally sit outside your existing rent roll's RSO limits. The gap between that page and this one is entirely about timing: finished and rented is an asset; in-process is a project you're asking the buyer to finish, and they will price it accordingly. The general sequence for pricing and marketing the building around it is in how to sell an apartment building in Los Angeles.
An open ADU permit is not a defect, but it's also not a value driver until it clears the finish line. Sellers who understand which of the four stages they're in, and price accordingly, avoid the awkward conversation where a buyer's opening offer treats the almost-finished unit as if it doesn't exist. Because for underwriting purposes, until it's final, it doesn't.
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Does an unbuilt ADU add any value at sale?
Some, if the permit is approved and the entitlement itself has value to the buyer, but far less than a finished, rented unit — and a lender typically won't count the projected rent until construction is complete.
Who finishes the ADU if I sell before it's done?
The buyer does, unless you negotiate a seller credit or a completion holdback tied to a specific bid, similar to how an unfinished renovation is handled.
Should I finish the ADU before listing?
If the remaining cost is modest and you can complete it within a normal marketing timeline, finishing it usually nets more than selling it unfinished. If it's early-stage or stalled, selling as-is to a buyer equipped to finish it is often faster.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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