Calculating Net Worth

[Ron Scott]

I keep a running net worth sheet broken down by the various investments and assets I have and consider it to be a very important yardstick for managing finances, for me personally. I'll retire in 18 months or less and plan to continue the practice.

I'm looking to buy a condo in FL and got a copy of the board requirements, which reads in part, "attach a statement of net worth".

Questions I have:

1. Is there a recognized way to account for tax liabilities in complicated KSOPs (with NUA pending), inherited IRAs, and related oddities? On my personal spreadsheet I divide the balance by 2, but the real amount will likely be larger in retirement, given the NUA and lower tax rate. I asked a board member and their managing agent and they were clueless.

2. Would you really list all your assets in a statement to a condo board if you had more than needed? (Why do they need to know?)


Thanks.

[CaliJim]

Just make your best estimate of the value in a simple list, then include footnotes to explain how you arrived at the values

List of Assets
Asset 1, $$$$
Asset 2, $$$$ (fn1)
Asset 3, $$$$ (fn2)
Less
Liability 1, -$$$$
Liability 2, -$$$$
Networth
Total Net Worth

Footnotes:
1) Asset 2: Description, Comments, Cost Basis, Market Value, Potential Liabilities against asset, notes, comments, basis for calculating value show above, etc

2) Asset 3: Description, Comments, other information, net present value of expected cash flow, discounted at appropriate rate (ie. 10 year treasury rate), etc

- edit to add -
I would not list everything either. and keep the list at a high level. don't list individual funds, stocks etc.

[Gill]

I can't imagine you need to submit a full balance sheet to buy a condominium. I would give them a statement such as "over $1 million" and see how that flies.
Gill

[PFInterest]

i would hesitate to list my actual net worth to the board as well.

[Ron Scott]

Thanks folks. Good input...

[dbr]

I know very little about this but it does seem Google for "GAAP for personal financial statements" has some material. Maybe a CPA accountant would know how to do this in an "official" way.

I agree this would hardly be necessary to buy a condo and past a certain point none of their business. As a know nothing the idea of "greater than one billion dollars (or whatever)" also appeals to me.

[TRC]

Would you really list all your assets in a statement to a condo board if you had more than needed? (Why do they need to know?)

Unless they're financing your loan, this is none of their business. I would never give this to them.

[Steelersfan]

I live in a condo and am on the board. We don't require any such thing and I would not give them anything in detail; maybe something like "Net worth in excess of $xxx,xxx. And be conservative.

If they push you on it, have them show you where in their constitution or bi-laws such a requirement exists. It doesn't sould legal to me.

[blueblock]

2. Would you really list all your assets in a statement to a condo board if you had more than needed? (Why do they need to know?)

No, I wouldn't.

No doubt they're trying to ensure that they don't get deadbeat owners who fall behind on their assessments. If you've got something very general that might relieve their concern, you could give them that.

Really, though, you should think twice about buying into a unit where the board is this meddling. I'll bet dollars to donuts they have all sorts of idiot rules governing the lives of their owners that will make the place a living hell to reside.

[Steelersfan]

While it may be a symptom of a meddling board, it could just as easily be a symptom of a condo with a history of a lot of units that aren't paying their assessments. In the end that ends up with a financial burden on the units who are paying.

I'd be very wary of such a condo and do tons of research before buying in.

[Sandtrap]

Reminds me of private country clubs where the board posts a picture of you and your "bonifides" on the inner sanctum club wall to see if there are any objections from members to "belong".
This is a "Board" (Your Future Neighbors) which is a group of the building owners and probably not the HOA. In either case a financial statement should not be proferred. And, in some places considered "rude" to ask for.
Perhaps a short letter with salutation then a brief list:
1 Retired
2 Pension (insert any number you want/month)
3 Savings: (insert any 7-8 figure you want)

Then, "thank you for your consideration".
Short, polite, business.
Done.


AFIK, a condo board has no legal right to demand a Financial Statement, or equiv, from a prospective owner, nor should proferring one be a condition for entrance into its hallowed halls. And, if the "Board" goes so far as to need to "verify" your financial info (as above), then caution indeed.

[daveydoo]

I'm looking to buy a condo in FL and got a copy of the board requirements, which reads in part, "attach a statement of net worth".

Would you seriously consider living in a place where your neighbors require a statement of net worth? Isn't that the province of your lender? Do they require a statement of racial or ethnic ancestry? And if they did, would you ask about the preferred format?

[ubermax]

2. Would you really list all your assets in a statement to a condo board if you had more than needed? (Why do they need to know?)

The bylaws of many condo associations , AKA Homeowner's Associations or HOAs , permit the Board of Directors to bring foreclosure proceedings against the condo owner if monthly fees are delinquent after repeated requests for payment ; the bylaws spell out the process and the details - most Boards don't want to bring foreclosure proceedings because it's expensive, i.e. legal fees and time consuming , i.e. time is money not coming in , to name a couple of reasons and so knowing the net worth gives them a warm feeling , the fuzzies

Good Luck !!!!

[daveydoo]

The bylaws of many condo associations , AKA Homeowner's Associations or HOAs , permit the Board of Directors to bring foreclosure proceedings against the condo owner if monthly fees are delinquent after repeated requests for payment ; the bylaws spell out the process and the details - most Boards don't want to bring foreclosure proceedings because it's expensive, i.e. legal fees and time consuming , i.e. time is money not coming in , to name a couple of reasons and so knowing the net worth gives them a warm feeling , the fuzzies

Such bylaws were created for precisely this type of discrimination in precisely this type of community -- people who create these laws and the people who embrace them are made for each other and should live together. My HOA has rules and teeth but has never asked for my net worth. They're two different things.

[Boats day]

I would be very vague and not give them any detailed info.

I would just say my net worth is in excess of 1 million.

I would not give them any break down as it is none of their business.

[Bogel0048]

If you are confident you know the net worth amount they are looking for, I would give an honest number that represents your total liabilities, with a line item note that says "Mortgage, amount owed to the Mob, etc.", and then I would list a few simple assets such as "Vanguard mutual funds", house equity, 401(k), etc. that clearly get you over their target amount.

Or, if you know by talking to others at the condo association that a simple statement "My net worth is in excess of $X" will be sufficient, then do that.

If you can get over their target amount w/o listing your retirement savings that would be ideal (and very impressive!), since retirement savings are not particularly liquid, depending on your age.

[Sandtrap]

. . . . . . . . .

Or, if you know by talking to others at the condo association that a simple statement "My net worth is in excess of $X" will be sufficient, then do that.
. . . . . . . . . . .

Good point.
If you play in the same senior golf group at the country club with at least or many of the Board Members it will be a "shoe-in".
If your spouse is in the same social "welcoming commitee" as the Board Members and association, then it will be a "double shoe-in".

A formal letter with a very very brief summary of net worth reduced to 3 lines and 3 phrases should be more than sufficient. As others stated here, in some places it's a lot about knowing "who" you are and "fitting in" and the residents feeling comfortable and secure with you as it is vs vs. Some would be offended by that conformity, others would feel more secure. There are often many reasons beyond pure financial numbers. YMMV.

[LarryAllen]

Can they exclude you if you don't provide? I assume not so I would not disclose. Seems pointless.

[ubermax]

Such bylaws were created for precisely this type of discrimination in precisely this type of community -- people who create these laws and the people who embrace them are made for each other and should live together. My HOA has rules and teeth but has never asked for my net worth. They're two different things.

I would chacterize it as a business decision not discrimination ; take a private country club , they're not suppose to discriminate for all the usual reasons - although some still do - but they can kick members out who don't pay the dues ;we live in a condo and Ron's post provided good discussion this morning between myself and my boss , i.e. AKA my DW during our morning coffee time together.

Our association doesn't require any financial information from prospective buyers but our bylaws do include the foreclosure stuff that I noted earlier; CT state statutes contain a section that pertains to HOA's and having a foreclosure option to address delinquent owners is included ; it can act as a deterrent when you get the rare but possible "dead beat" owner.

DW and I both agreed that all the HOA in Ron's case really want is assurance and maybe evidence that Ron is on firm footing to pay future monthly fees and the occasional special assessment ; what he should provide can be debated , current income is useless without current liabilities ,etc. etc . ; I (we) agree with others that providing just enough information to convince them that you're solid should suffice but Ron has choices also , he doesn't have to buy there ; also if possible and as someone else suggested , he should try to talk to others who live there to get a better sense of what the real scoop is .

Good Luck Ron !!!

[daveydoo]

I would chacterize it as a business decision not discrimination ; take a private country club , they're not suppose to discriminate for all the usual reasons - although some still do - but they can kick members out who don't pay the dues

Not all rich guys pay their bills

Do they get credit reports? Or just net worth statements?

[ubermax]

Not all rich guys pay their bills

Exactly and the condo associations know that ; that's why many have the foreclosure hammer which is applied non discriminately

Haven't heard from Ron in awhile , he's received a lot of input , would be interesting to get his thoughts at this point.