I am actually a contractor as well as a Realtor, and in Maricopa County which is the municipality you most likely belong to being on an acre lot in Cave Creek, you would have to get a permit to remove the garage doors and enclose it into a casita to make it livable space. The casita would also have to be brought up to living standard codes, as ex. the electrical is most likely done to accomodate a garage and not living space. Another issue you may run into is septic if you are on one. Does the bathroom have a separate septic or is it tied into the septic of the house. If it is, does it still meet the max load? From an appraisers standpoint he would want to see the casita enclosed and brought up to living standards, he may not look too much into if the rest of the building is to current code, but it has to like Stew said, look like a house not a garage.