ADU Home Inspection: What Homeowners Should Know About Backyard Units
Buying a home with an ADU? Learn what an ADU inspection covers, how to check permits, identify safety risks, estimate repair costs, and avoid costly surprises.
What Is an ADU?
You find the perfect house, and the backyard has a cute little rental unit that could cover part of your mortgage every month. Then you learn something that stops you cold. One peer-reviewed study found that 78.2% of the detached backyard units built in San José between 2016 and 2020 were never permitted. That little income machine could quietly become your biggest headache the day you get the keys.
Types of ADUs
So the real question with any backyard unit comes down to this. Is this ADU legal, and if it is not, what will fixing it cost you? An unpermitted or poorly built unit can freeze your loan, get an insurance claim denied, come up short on the appraisal, and land on you as a brand new liability. By the end of this guide you will know what to check, what it costs, and when you should just walk away.
Why ADUs Are Booming (and Why That Is a Buyer's Problem)
ADU stands for accessory dwelling unit. In plain words, it is a small second home that sits on the same lot as a regular single family house. It has its own kitchen, its own bathroom, a place to sleep, and its own door to the outside. It is always the smaller of the two homes on the property.
Why an ADU Inspection Is Not a Normal Home Inspection
People call these units by a whole pile of names, which is part of why they are so hard to track. You might hear granny flat, granny unit, in-law suite, mother-in-law suite, casita, secondary suite, garage apartment, backyard cottage, carriage house, or just second unit. When one was built without permits, folks sometimes call it "shadow housing."
Permitted vs. Unpermitted: The Detail That Matters Most
The type of unit tells you a lot about how much risk you are taking on.
What an ADU Inspection Actually Covers
Backyard units are showing up everywhere now. Freddie Mac counted about 1.4 million US properties with an ADU. In California the growth has been wild. The state went from 1,336 ADU permits in 2016 to 26,924 in 2023, and by that year ADUs made up more than a fifth of every home permitted across the whole state.
Garage-Conversion Red Flags
Here is the part that should make a buyer sit up. A 2023 Freddie Mac survey found that 71% of people did not really know what an ADU was, and about a third got interested once they learned. So the market is huge, it is growing fast, and most of it is undocumented. That means the job of checking whether a unit is actually legal lands on you, the buyer.
What It Costs: Inspection, Repairs, and Legalization
Here is the mistake most people make. They treat the backyard unit as a fun bonus feature stapled onto the main house. Please do not do that. Treat the ADU as a second home inspection all by itself. It has its own electrical, its own plumbing, its own heating, and its own list of problems, and its condition is often very different from the main house next to it.
Financing, Appraisal, and Insurance
A regular home inspection follows the ASHI Standards of Practice, which is a solid baseline. But a generic inspector may skip the things that matter most for a second unit. That includes whether the electrical is truly separate, whether there is proper fire separation between attached units, whether the heating and plumbing stand on their own, and whether the permits and Certificate of Occupancy really exist. Knowing local ADU code is what separates a real ADU inspection from a lazy one.
Codes and State Laws, Kept Simple
If you remember one thing from this whole article, make it this part. Permit status is the single most important detail in any deal with a backyard unit. It matters more than any crack in the wall or old water heater you might spot.
Your Action Plan: Before, During, and After
Here is the trap almost nobody warns you about. A permit that was pulled but never signed off, called an "open permit," gets treated exactly like no permit at all by lenders, insurers, and title companies. Inspectors run into this constantly. The owner paid the fees, a contractor pulled the permit, and then nobody ever came back for the final sign-off. So you have to check the actual status, not just whether some permit exists on paper.
How to Pick an ADU Inspector
You can do most of this before you even make an offer.
Key Takeaways
An unpermitted unit can hit you in several ways at once.
Common questions
And enforcement is climbing. In LA County, ADU code-violation cases jumped from 16 a year in 2018 to 53 a year in 2023, which is a 230% surge.
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This is the real meat of the job. A good inspector goes system by system. Here is what they look at and why each one can bite you.
Foundations should reach deep enough to be safe. In the City of LA, that means at least 12 inches below grade. Old garage slabs often skip the moisture barrier and sit too shallow for a real home. Rotted wood or weak beams can quietly turn a conversion into a teardown.
This is one of the biggest problem areas by far. The unit's circuits must be fully separate from the main house, and all new circuits need AFCI protection. An old garage was wired for a single 20-amp circuit to run a light and a door opener, which cannot power a real home with a kitchen and heat. Most units need at least a 100-amp subpanel, and that upgrade runs about $2,000 to $5,000.
Most ADUs tie into the main home's sewer line. Ask for a sewer scope, which costs about $200 to $500 and can save you from a truly nasty surprise. A new sewer lateral can run $5,000 to $15,000, and septic work can climb even higher. Water pressure should stay at or below 80 PSI.
A detached unit needs its own heating, cooling, and hot water. Small systems get worked hard, and a sloppy install fails fast once winter hits.
Garage walls are often too thin for the insulation the code wants. If there is no ventilation system at all, that is a bright red flag for an illegal conversion.
The main door should be at least 36 inches wide and 80 inches tall and open straight to the outside. Every bedroom needs an escape window big enough to climb out of during a fire. Living spaces need ceilings at least 7 feet high, which trips up a lot of basement conversions.