Would you be willing to sell an ADU separately from your house? That’s a wild idea, but it’s exactly what a newer California law allows people to do. The first example of a sale like this happened recently in San Jose, so let’s talk about this law and what to do for comps. When laws or markets change, we sometimes have to start thinking about things differently.

NOTE: I shared new stats last week on the stats tab instead of writing an entire post with twelve counties of data. Also, I’ve talked more about ADUs lately. This is not an ADU blog. Just a coincidence.
UPCOMING SPEAKING GIGS:
8/25/26 Elk Grove MLS Meeting 8:30am
9/1/26 ROG Talks
9/9/26 Private market update with local builder
9/15/26 Culbertson & Gray
9/22/26 Downtown Regional MLS Meeting Q&A
9/24/26 Appraiser webinar TBA
10/2/26 PCAR Rocklin
10/21/26 Coldwell Banker Sierra Oaks / EDH
11/19/26 Appraiser webinar TBA

THE FIRST CONDO CONVERSION JUST HAPPENED
Two years ago, AB 1033 became law, and this allows owners to sell an ADU separately from the main house. This would not normally be allowed without some sort of a parcel split, but under AB 1033, the entire parcel can be converted to a condo, and that allows the rear ADU condo to be sold separately. Basically, the parcel becomes a two-unit condo development. On one hand, this is innovative thinking to help with affordability, but on the other hand, this type of law is sadly only needed because of a lack of affordability. Anyway, the first reported sale of an ADU condo conversion just happened in June in San Jose, so I wanted to put together some visuals for perspective since I have access to San Jose data.
EXPECT TO SEE THIS MORE IN OTHER CITIES
Keep in mind, AB 1033 is not mandatory, so these types of sales can’t happen everywhere since individual areas have to adopt the law. Only one local city I’m aware of has adopted AB 1033, and that’s West Sacramento (it’s being discussed in Sacramento). Otherwise, there are a handful of cities across the state that have embraced this new law including San Jose, San Diego, Berkeley, Oakland, San Francisco, Santa Monica, and others.

THIS UNIT SOLD TOWARD THE LOWER END OF THE MARKET
What are you going to do for comps if this law happens in your area? That’s one reason why we want to start watching examples like this. The 749 sq ft ADU conversion in San Jose sold toward the lower end of the competitive range in the ZIP Code at $530,000. Look, it’s hard to buy anything at this price point in the area. Remember, this is the city where a meth house was listed for sale at $1.5M a couple years ago (it sold at $1.36M). There are zero single family detached units selling around $530K, and there are only a few recent condo sales that low. Keep in mind, this former ADU was built in 2024, so it’s on the newer side of the age spectrum. From public records and MLS, it looks like it was financed with conventional financing, which means an appraiser had to choose condo comps from somewhere most likely (unless there was an appraisal waiver).

All condos in bright pink compared to 600-900 SQ FT in yellow.

And here’s a look at all single family detached sales of similar size compared to the ADU condo conversion. The closest sale of similar size was about $700,000. Granted, the ADU conversion isn’t really a single family detached home, so this is not a reasonable comparison. I just wanted to show context as it looks like AB 1033 is going to help some people get into the housing market at a lower cost.

QUESTIONS FOR THE FUTURE
1) What comps do we use for an ADU conversion?
What condo comps can we use for an ADU conversion if there aren’t any ADU conversion condos yet in the local area? In this example above, the ADU conversion sold toward the lower end of the competitive range, and that’s something we can keep in mind, but it’s also just one data point. What we want to do over time is look at various examples. Granted, if they all tend to sell toward the lower end of the range, that would be telling. For now, I think these types of valuations are going to be challenging for appraisers and the real estate community because there might not be any great comps for a while. At the least, it’ll be helpful to pull some examples in other parts of the state to study. Let’s ask questions though. What is the entry level price point for the neighborhood? What are other condos selling for? What are other detached homes of similar size selling for? And from an investment standpoint, is the sum of the parts greater than the whole here? In other words, will investors be able to split and make more money by selling each unit separately?

Remember, the ADU is now a condo, so we’re going to compare it to other condos. It’s a tough comparison because it’s not really the same thing as a traditional condo found in a gated complex.
2) What happens to the value of the main dwelling?
Is the value of the main dwelling going to be affected by the condo conversion? We’re going to need some data at some point to understand any impact. Keep in mind, the main house is now also considered a condo since everything on the parcel has been converted to a condo. It’s not just the ADU being converted. Will the need for condo financing or a condo form of ownership affect buyer demand and value? We don’t have these answers yet, but I have to think the pool of buyers is now smaller for a main home (I could be wrong). Previously, the main house on the front of the lot above sold for $900,000 in November 2020 without the ADU. After the ADU was built in 2024, the owner tried to sell the house and ADU for $1,390,000 in early 2025, but the listing expired.
UPDATE: Monica in the comments told me the main unit is currently listed for sale, and that’s true. Listed at $868,000 (listed as a condo on MLS too).
3) How many owners will make this conversion?
Converting the entire parcel to a condo comes with some challenges because now the main house has a little less privacy potentially, and it also needs to be compared to other condos as the ideal. I suspect this new law is only going to apply to a handful of situations.

4) What other counties and cities will adopt AB 1033?
AB 1033 is state law in California, but it has to be adopted by various counties or cities, so it is not mandatory. I do think we’re going to see more cities adopt this, so real estate professionals need to stay on their toes. I suspect there is going to be an appetite for buying something like this also as it gets someone into a traditional neighborhood at a condo price point (without a huge HOA fee probably too). Remember, just because it is law doesn’t mean it’s going to happen on every parcel. I think many owners would not be comfortable with the condo conversion in the first place, so I don’t expect to see this everywhere.
CLOSING THOUGHTS
This is an example of policy shaping the housing market. We often talk about supply and demand as being the main thing in real estate, but it’s really policy that shapes both supply and demand. In this case, on the buyer side, I like the idea of buying an ADU conversion in a neighborhood instead of a bigger condo community, but I think there are concerns for the owner when converting the entire parcel to a condo in terms of future marketability or privacy. This won’t work for everyone, but it will work for some.
Thanks for being here.
Question: Would you buy a condo conversion like this? Would you convert your parcel into a condo? I’d love to hear your take.
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