When calculating net worth, how do you value your house?

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coinflip
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When calculating net worth, how do you value your house?

Post by coinflip » Wed Sep 06, 2017 8:24 am

Do you use purchase price, appraisal value, property assessment, Zillow's Zestimate, or something else?

Mountain Fiddle
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Re: When calculating net worth, how do you value your house?

Post by Mountain Fiddle » Wed Sep 06, 2017 8:28 am

We use Mint for tracking our spending. It pulls the most recent estimates automatically from Zillow, which we take with a grain of salt.

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Re: When calculating net worth, how do you value your house?

Post by cadreamer2015 » Wed Sep 06, 2017 8:30 am

I don't usually think much about the value of my house in a net worth calculation - we've got to live somewhere. I guess it would be important if we were near the estate tax limits, but we aren't. If forced to pick a number I would use a recent appraisal. Failing that I would go with an average of on-line estimates like Zillow, Trulia, USAA.

I guess I would ask first why you are doing a net worth calculation in the first place? Just to keep score, or is there some other reason?
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Re: When calculating net worth, how do you value your house?

Post by oldcomputerguy » Wed Sep 06, 2017 8:34 am

We purchased our current home twenty years ago. About eight years ago we refinanced into a 15-year mortgage, and paid that off a couple of years ago. The refinance appraisal was about 20% higher than the purchase price. The last property tax assessment was about 37% higher than the original purchase price (about 15% higher than the refi appraisal). I tend to use the refi figure, when I think about it at all.
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coinflip
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Re: When calculating net worth, how do you value your house?

Post by coinflip » Wed Sep 06, 2017 8:40 am

cadreamer2015 wrote:
Wed Sep 06, 2017 8:30 am
I guess I would ask first why you are doing a net worth calculation in the first place? Just to keep score, or is there some other reason?
I like to track my net worth at least once a year as part of monitoring my finances. Last year, I changed from renting to owning and had to make a large (50%) down-payment. It would seem weird for net worth to fall dramatically just because I'm ignoring home equity.

Some special circumstances in my case. I bought an apartment in New York and have done substantial renovations. Zillow's algorithm really doesn't work for New York, so that option is out. And the purchase price and appraisal reflect pre-renovation value. Property taxes get assessed on the apartment building as a whole, so hard to use that to value my unit.

I expect my downstairs neighbor with a recently-renovated apartment that has the same layout as mine will put his unit on the market later this year, so I'll use that as a guide to market value of my own apartment.

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Re: When calculating net worth, how do you value your house?

Post by ResearchMed » Wed Sep 06, 2017 8:41 am

Zillow seems high to me, although there are some homes nearby that have sold quite a bit higher than the Zillow estimate.

We used to ignore home equity, in terms of net worth and retirement planning.

However, as retirement approaches (eventually), given that we have a mortgage (and no plans to pay it down), and the property values in the area have really gone up (a nice surprise), I sort of "keep in the back of my mind" that we might have an additional amount that I guesstimate as about half the apparent equity.
But we are not in any way depending upon any of that in terms of need or even comfort. It's just a "wouldn't that be nice!" thing.

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Re: When calculating net worth, how do you value your house?

Post by midareff » Wed Sep 06, 2017 8:42 am

I don't count car or home. Should I?
Last edited by midareff on Wed Sep 06, 2017 8:42 am, edited 1 time in total.

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Re: When calculating net worth, how do you value your house?

Post by Kenkat » Wed Sep 06, 2017 8:42 am

I have traditionally used a combination of all of those sources plus general knowledge of the real estate market for comparable homes in my area to set my own value.

Zillow historically has always seemed on the high side although looking just now, the number given is pretty close to where I think it should be.

My property assessment value has typically been pretty close to where I think it should be - it was probably a little high for several years (I did an informal appeal and got nowhere). My most recent assessment value came in low - actually below my purchase price from nearly 20 years ago. I am quite certain my house would sell for more than this figure, but if the county auditor's office wants to lower my tax base, I'm good with that.

I will probably leave my value for net worth purposes where it currently sits, which is about 20% higher than what I paid for the house in 1998.

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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 8:46 am

midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
IMHO, no.

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Re: When calculating net worth, how do you value your house?

Post by Steve723 » Wed Sep 06, 2017 8:54 am

I include my home equity in my net worth calculation. I use the low end of the Zillow number based on how it has fluctuated over the past 12 months or so.

In terms of calculating my financial independence number for a sustainable safe withdrawal rate, I kind of split the baby and use half of my home equity value. I get the whole, "well you have to live somewhere!" argument for excluding home equity, but if I die with literally nothing BUT my home equity, that's still 400K left to my heirs! Am I supposed to completely ignore that? Home equity can also be used for immediate cash needs; one can downsize and put some of that home equity to use via investments, etc. It just seems overly conservative to me to completely exclude home equity from one's overall "number" for retirement/safe withdrawal rate calculations. So I compromise and just use half the value.

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Re: When calculating net worth, how do you value your house?

Post by ryman554 » Wed Sep 06, 2017 8:58 am

KlangFool wrote:
Wed Sep 06, 2017 8:46 am
midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
IMHO, no.

KlangFool
For Net Worth, you should. But Net Worth has a very specific meaning and does not correlate perfectly with being able to eat in the short term (but does much better for the long term) which is why we keep getting these questions every couple of weeks or so.

Liquid (spendable) assets is another good metric to see how long you would last without income. Better, but not perfect, for answering the "can i retire" question.

Monthly cash-flow is yet a third metric and takes into account current liabilities for eating and debt maintenance. Needed to set a budget to increase the above two.

**
To answer the OP question. "take you best guess with comps and include it". But, why do you ask?

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Re: When calculating net worth, how do you value your house?

Post by takeshi » Wed Sep 06, 2017 9:02 am

Mountain Fiddle wrote:
Wed Sep 06, 2017 8:28 am
We use Mint for tracking our spending. It pulls the most recent estimates automatically from Zillow, which we take with a grain of salt.
Same here. If OP really wants to get a reasonable figure then the usual process of looking at comps is the way to go. Zillow is close enough for us.

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Re: When calculating net worth, how do you value your house?

Post by neilpilot » Wed Sep 06, 2017 9:03 am

I don't count my home, autos, or aircraft; only liquid assets. Also, I discount my IRA/401k assets by 25%, since I anticipate that as my marginal tax rate throughout retirement.

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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 9:06 am

ryman554 wrote:
Wed Sep 06, 2017 8:58 am
KlangFool wrote:
Wed Sep 06, 2017 8:46 am
midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
IMHO, no.

KlangFool
For Net Worth, you should.
ryman554,

Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.

KlangFool

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Re: When calculating net worth, how do you value your house?

Post by keystone » Wed Sep 06, 2017 9:08 am

coinflip wrote:
Wed Sep 06, 2017 8:24 am
Do you use purchase price, appraisal value, property assessment, Zillow's Zestimate, or something else?
I go with my best estimate, based on recent sales for homes that appear similar to mine in my immediate neighborhood. I also take note of the estimates on Zillow and Redfin which tend to be very close to my estimate +/- 1%.

I include the equity in my house when I do an annual net worth calculation. Even though I have no intentions of moving anytime soon, it is nice to know that I have an additional resource that can be used in a time of need. Plus we live in a HCOL area and it's not out of the question that we will one day move to a lower COL area and would be able to pocket the difference in housing costs. It's not something I count on, but it's nice to know that it's a possibility.

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Re: When calculating net worth, how do you value your house?

Post by goingup » Wed Sep 06, 2017 9:09 am

Net worth is assets minus liabilities.

For your home, that's market value (Redfin or Zillow estimate) minus your outstanding mortgage balance. I don't track it myself as it isn't an important number to me.

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Re: When calculating net worth, how do you value your house?

Post by jebmke » Wed Sep 06, 2017 9:12 am

I use the latest assessment unless I have some reason to think it is wrong. I only include hard assets when dealing with estate planning so the lawyer knows what the total value of the estate might be. For retirement I don't include anything that can't be converted to food within say, one business week.
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Re: When calculating net worth, how do you value your house?

Post by HomerJ » Wed Sep 06, 2017 9:18 am

coinflip wrote:
Wed Sep 06, 2017 8:24 am
Do you use purchase price, appraisal value, property assessment, Zillow's Zestimate, or something else?
For us, it's basically purchase price. We do track what other similar houses in the neighborhood are going for to get a rough idea.

Home equity is definitely part of one's net worth, but I don't bother counting it any more when doing any calculations. Our house is paid off, so I account for it through our expenses.

Instead of needing $8000 a month in retirement, we will need $6000 a month.

And we don't intend to downsize on price. What we have in housing right now is our housing budget if we ever move. So it's easy to just ignore it. I also like the security of it being yet another buffer in my retirement plan.

Now, for people with a mortgage, and especially people who intend to downsize in price in retirement, and use some of that housing equity for retirement expenses, it's much more important to have a decent idea of one's home worth for planning purposes. But again, the best indicator is probably what a similar house in your neighborhood sold for last month.

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Re: When calculating net worth, how do you value your house?

Post by njdealguy » Wed Sep 06, 2017 9:21 am

Why not count home in net worth. I've been reading different debates on this interesting topic on several threads from users such as Klangfool and just curious. What if person A has a paid off house worth $2 million along with $250k in other invested assets....while a person B doesnt own a house, is a renter and has $400k in invested assets. By your logic, person B is the wealthier one? Person A can always downsize or go into renting to make the assets more liquid.

On another note, I base my net worth on my home purchase price of approx 650k made about 10 years ago even though the actual current value is more like 800k now (being conservative to buffer in possible value fluctuations and closing costs/commissions that would be incurred in selling). On the other hand if the value later continues to grow a good amount, another 5% maybe, might consider allowing myself to record a 100k gain in perceived "net worth" :D

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Re: When calculating net worth, how do you value your house?

Post by HomerJ » Wed Sep 06, 2017 9:22 am

KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

I agree with you that when I do my financial retirment calculations, it's useful and easier for me to just ignore my house equity.

But net worth is net worth. Net worth includes your home. But feel free to ignore it (like I do) when calculating your investable assets for retirement planning.

But don't try to change the meaning of "net worth".

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Re: When calculating net worth, how do you value your house?

Post by prudent » Wed Sep 06, 2017 9:23 am

I include it for net worth purposes at a value I found on Zillow about 3 years ago. I'm sure it's not super-accurate but by the same token it doesn't really affect my planning currently. If I am off $5K, $50K or $200K it wouldn't change anything I'm doing or planning to do. When the day comes when we think about selling, that's when I'll care. Of course, if for some inexplicable reason home values in our area skyrocketed or cratered, I'd find out because my neighbor would be sure to tell me. He's quite fascinated by what homes sell for.

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Re: When calculating net worth, how do you value your house?

Post by ResearchMed » Wed Sep 06, 2017 9:24 am

We count that "approximately half of the assumed equity" because we WILL be selling our house and then either rent or use the money for an assisted living facility or such. We are not planning to leave a home to anyone else.
So the "you have to live somewhere" is already factored in, one way or another, as something similar to the current mortgage payments.
We didn't expect this much home equity appreciation so we didn't count any home equity until recently.
The "1/2" of approximate home equity would be a great "extra", but we aren't counting on it.

That also explains keeping the very low interest mortgage.
We currently pay less than we'd have to pay in rent for similar home, get the tax deduction (for a while more at least), AND might have that appreciation. Once we sell, we'll definitely downsize.
Our "mortgage payments" will become "rent payments", or part of the monthly fee for the ALF.

We figure our retirement income will be approximately similar to pre-retirement income, and that's just fine with us.
IF we end up with more, all the better, for more travel :happy

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Re: When calculating net worth, how do you value your house?

Post by JW-Retired » Wed Sep 06, 2017 9:30 am

We don't have any practical use for net worth, but I do calculate ours (including the house) every few months to see the trend. Just use the Zillow estimate at the time. It does seem to be pretty up to date around here.

It's California so assessment or purchase price is meaningless.
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Re: When calculating net worth, how do you value your house?

Post by DrGoogle2017 » Wed Sep 06, 2017 9:44 am

Only when I answer networth polls online. Otherwise I don't have a deep need to know the exact value.

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Re: When calculating net worth, how do you value your house?

Post by Watty » Wed Sep 06, 2017 9:46 am

midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
"should" is the wrong way to ask that question since the right answer is not a matter of opinion. The right question to ask is if home equity is included in the definition of net worth.

You can google the definition of "net worth" and you will not find any definitions that exclude it. Here is one.

http://www.investopedia.com/terms/n/networth.asp

For "net worth" there is no question that your home equity and cars ares part of the figure.

The amount would be what you would clear if you sold the house after paying things like real estate commission.

In my net worth spreadsheet I do have a separate subtotal of my investments and the home equity my house is not included in that. If I had any rental property I would include the equity in the rental house in the investment subtotal.

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Re: When calculating net worth, how do you value your house?

Post by Pranav » Wed Sep 06, 2017 9:50 am

We don't include house equity in net worth. We consider it as a safety net that can be tapped in the extreme financial situation.
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Re: When calculating net worth, how do you value your house?

Post by jhfenton » Wed Sep 06, 2017 10:06 am

#1: If you made me calculate net worth, I would include the value of our cars and net value of our house.

But #2: I don't calculate net worth.

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Re: When calculating net worth, how do you value your house?

Post by neilpilot » Wed Sep 06, 2017 10:19 am

neilpilot wrote:
Wed Sep 06, 2017 9:03 am
I don't count my home, autos, or aircraft; only liquid assets. Also, I discount my IRA/401k assets by 25%, since I anticipate that as my marginal tax rate throughout retirement.
To qualify the above, I too don't calculate net worth since I'm not close to the estate tax threshold. I calculate Liquid Assets, for retirement planning purposes.

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Re: When calculating net worth, how do you value your house?

Post by cadreamer2015 » Wed Sep 06, 2017 10:26 am

#1: If you made me calculate net worth, I would include the value of our cars and net value of our house.

But #2: I don't calculate net worth.
+1 :happy
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Re: When calculating net worth, how do you value your house?

Post by Grt2bOutdoors » Wed Sep 06, 2017 10:31 am

At original cost. It would be nice to receive back the cost of additional improvements, but if I spend 20-30 years in the home I will have realized those benefits in the form of improved living conditions. The maintenance, it never ends.
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Re: When calculating net worth, how do you value your house?

Post by bklyn96 » Wed Sep 06, 2017 10:42 am

coinflip wrote:
Wed Sep 06, 2017 8:40 am
....I bought an apartment in New York and have done substantial renovations...I expect my downstairs neighbor with a recently-renovated apartment that has the same layout as mine will put his unit on the market later this year, so I'll use that as a guide to market value of my own apartment.
I agree this will give you a reasonable number. Also, are you aware of NYC's ACRIS database? Every property transaction is listed there so you can see all the recent sales in your building. It can take a while to learn how to navigate around the site and read the listings but every sale going back decades is there.

Here's the link: http://a836-acris.nyc.gov/CP/

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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 10:43 am

HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool

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Re: When calculating net worth, how do you value your house?

Post by David Jay » Wed Sep 06, 2017 10:51 am

Zestimate seems a bit generous in my case. I use Zestimate less 10%
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Re: When calculating net worth, how do you value your house?

Post by NotWhoYouThink » Wed Sep 06, 2017 10:53 am

I use some unscientific combination of Zillow and recent home sales in the area, and adjust the number in the spreadsheet every couple of years. Just checked, it's probably time for an update. Maybe for the January iteration.

My net worth calculation is mostly for fun, but partly for information for kids and executor in case a bad thing happens. A different spreadsheet shows investible assets and projected income streams for retirement. That one does not show home value. My assumption is we'll either stay here, or have expenses similar to the ones we have here.

Car values and replacement costs don't show up explicitly in either document, although there is one investment account that is designated for cars and vacations. AA is consistent with our overall AA, but this account is not designated for monthly income needs. As for current car values, one of them I'd have to check the fuel gage to come up with a good number, the other 2 I just don't bother.

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Re: When calculating net worth, how do you value your house?

Post by uncaD » Wed Sep 06, 2017 10:56 am

I have always just used our cost basis in my spreadsheet. We haven't lived in any place for more than a few years, though.

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Re: When calculating net worth, how do you value your house?

Post by MikeWillRetire » Wed Sep 06, 2017 11:00 am

KlangFool wrote:
Wed Sep 06, 2017 8:46 am
midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
IMHO, no.

KlangFool
Well when you die, your heirs will disagree.

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Re: When calculating net worth, how do you value your house?

Post by objectivefunction » Wed Sep 06, 2017 11:02 am

I tend to care more about "investable assets," so I pay attention to savings accounts, retirement accounts, taxable accounts.

I do track how much equity I have in my house by comparing the purchase price to the loan balance. I don't bother with trying to guess at my house's value.

Occasionally I take a look at Zillow or the $/sf of recent sales, but that's just for entertainment.

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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 11:08 am

MikeWillRetire wrote:
Wed Sep 06, 2017 11:00 am
KlangFool wrote:
Wed Sep 06, 2017 8:46 am
midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
IMHO, no.

KlangFool
Well when you die, your heirs will disagree.
MikeWillRetire,

Why would I care? Life is too short to be wasted on things that do not matter.

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Re: When calculating net worth, how do you value your house?

Post by njdealguy » Wed Sep 06, 2017 11:12 am

KlangFool wrote:
Wed Sep 06, 2017 10:43 am
HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool
In that case everyone should be renters so that net worth can be fairly assessed and compared to others. Otherwise, you are "poorer" with your paid off 5 million dollar house but no other investments than someone with $500 in their bank account.

What if your a landlord with 100 properties and several million dollars in equity, does that also not count in net worth according to your rules?

Or how about this idea, if your a renter, assess how much the place you rent would cost to buy and subtract that directly from your "net worth" which could make it negative if you have no other assets and rent a place worth 150k so therefore net worth is automatically -150k! That would make comparisons more fair if net worth is NOT supposed to include a owned home.

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Re: When calculating net worth, how do you value your house?

Post by ThriftyPhD » Wed Sep 06, 2017 11:17 am

KlangFool wrote:
Wed Sep 06, 2017 10:43 am
HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool
Last year I fully funded my 401k by burying 401,000 pennies in the backyard. I put all the rest of my take home money into mutual funds. Mostly by bank's checking and savings accounts, which are funds owned mutually with my wife. The second largest tax I pay, after federal income, is gas for my car.

Things can get difficult to follow and impossible to discuss when people are using incorrect definitions for things that are pretty well defined. Assets - Liabilities is a pretty solid definition.

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Re: When calculating net worth, how do you value your house?

Post by njdealguy » Wed Sep 06, 2017 11:24 am

ThriftyPhD wrote:
Wed Sep 06, 2017 11:17 am
KlangFool wrote:
Wed Sep 06, 2017 10:43 am
HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool
Last year I fully funded my 401k by burying 401,000 pennies in the backyard. I put all the rest of my take home money into mutual funds. Mostly by bank's checking and savings accounts, which are funds owned mutually with my wife. The second largest tax I pay, after federal income, is gas for my car.

Things can get difficult to follow and impossible to discuss when people are using incorrect definitions for things that are pretty well defined. Assets - Liabilities is a pretty solid definition.
By KF's rules, our president supposedly has zero or negative net worth since most of his assets are related to real estate which is not allowed in net worth accordingly!

mbasherp
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Re: When calculating net worth, how do you value your house?

Post by mbasherp » Wed Sep 06, 2017 11:25 am

I use 93% of the Zestimate as the value of my home in my net worth spreadsheet. I feel this is more accurate if the house were sold. I would likely sell via Redfin for a 4.5% commission and reduce by a further 2.5% to keep it slightly conservative. Zestimates in my area seem close to right on with actual market conditions.

S&L1940
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Location: South Florida

Re: When calculating net worth, how do you value your house?

Post by S&L1940 » Wed Sep 06, 2017 11:27 am

Nice to know what our kids may get for the home
Living in a 'gated community' numbers are easy to obtain
No interest in downsizing - Yet
So, for us, home value is simply a fixed line item

More concerned in what Irma will do to our home value, will check back on Sunday...
Don't it always seem to go * That you don't know what you've got * Till it's gone

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midareff
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Location: Biscayne Bay, South Florida

Re: When calculating net worth, how do you value your house?

Post by midareff » Wed Sep 06, 2017 11:28 am

Watty wrote:
Wed Sep 06, 2017 9:46 am
midareff wrote:
Wed Sep 06, 2017 8:42 am
I don't count car or home. Should I?
"should" is the wrong way to ask that question since the right answer is not a matter of opinion. The right question to ask is if home equity is included in the definition of net worth.

You can google the definition of "net worth" and you will not find any definitions that exclude it. Here is one.

http://www.investopedia.com/terms/n/networth.asp

For "net worth" there is no question that your home equity and cars ares part of the figure.

The amount would be what you would clear if you sold the house after paying things like real estate commission.

In my net worth spreadsheet I do have a separate subtotal of my investments and the home equity my house is not included in that. If I had any rental property I would include the equity in the rental house in the investment subtotal.

I don't include them Watty anymore than I include future value of my pension or SS. I only include what can be cash in 48-72 hours.

KlangFool
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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 11:32 am

njdealguy wrote:
Wed Sep 06, 2017 11:12 am
KlangFool wrote:
Wed Sep 06, 2017 10:43 am
HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool
In that case everyone should be renters so that net worth can be fairly assessed and compared to others. Otherwise, you are "poorer" with your paid off 5 million dollar house but no other investments than someone with $500 in their bank account.

What if your a landlord with 100 properties and several million dollars in equity, does that also not count in net worth according to your rules?

Or how about this idea, if your a renter, assess how much the place you rent would cost to buy and subtract that directly from your "net worth" which could make it negative if you have no other assets and rent a place worth 150k so therefore net worth is automatically -150k! That would make comparisons more fair if net worth is NOT supposed to include a owned home.
njdealguy,

<< In that case everyone should be renters so that net worth can be fairly assessed and compared to others. Otherwise, you are "poorer" with your paid off 5 million dollar house but no other investments than someone with $500 in their bank account.>>

Why is it useful to compare with others?

<<What if your a landlord with 100 properties and several million dollars in equity, does that also not count in net worth according to your rules?>>

We are discussing primary residence aka the house that you live in.

KlangFool

ddurrett896
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Re: When calculating net worth, how do you value your house?

Post by ddurrett896 » Wed Sep 06, 2017 11:33 am

If you do calculate them, I'd use a fire sale price - not the going rate.

Jags4186
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Re: When calculating net worth, how do you value your house?

Post by Jags4186 » Wed Sep 06, 2017 11:35 am

There is no legitimate argument for not including it and I don't know why this is a question or controversial.

OP you should use fair market value. Take off 6% for commission if you'd like.
Last edited by Jags4186 on Wed Sep 06, 2017 11:40 am, edited 1 time in total.

KlangFool
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Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 11:37 am

ThriftyPhD wrote:
Wed Sep 06, 2017 11:17 am

Last year I fully funded my 401k by burying 401,000 pennies in the backyard. I put all the rest of my take home money into mutual funds. Mostly by bank's checking and savings accounts, which are funds owned mutually with my wife. The second largest tax I pay, after federal income, is gas for my car.

Things can get difficult to follow and impossible to discuss when people are using incorrect definitions for things that are pretty well defined. Assets - Liabilities is a pretty solid definition.
ThriftyPhD,

<< Things can get difficult to follow and impossible to discuss when people are using incorrect definitions for things that are pretty well defined.>>

Why is that a bad thing?

<<Assets - Liabilities is a pretty solid definition.>>

As per your opinion and definition, I do not have to agree with you.

KlangFool

KlangFool
Posts: 6982
Joined: Sat Oct 11, 2008 12:35 pm

Re: When calculating net worth, how do you value your house?

Post by KlangFool » Wed Sep 06, 2017 11:40 am

Jags4186 wrote:
Wed Sep 06, 2017 11:35 am
There is no legitimate argument for not including it and I don't know why this is a question or controversial.
Jags4186,

What is the legitimate argument for including it? May I ask.

Just because somebody says so and it is a standard definition do not cut it for me.

KlangFool

njdealguy
Posts: 20
Joined: Wed Jul 26, 2017 8:15 am

Re: When calculating net worth, how do you value your house?

Post by njdealguy » Wed Sep 06, 2017 11:42 am

KlangFool wrote:
Wed Sep 06, 2017 11:32 am
njdealguy wrote:
Wed Sep 06, 2017 11:12 am
KlangFool wrote:
Wed Sep 06, 2017 10:43 am
HomerJ wrote:
Wed Sep 06, 2017 9:22 am
KlangFool wrote:
Wed Sep 06, 2017 9:06 am
Respectfully, I disagreed. It is more useful for me not to include. As for others' opinion, they have not proven to me.
Net worth has one meaning. You don't get to have your own definitions of words. Not if you want to communicate with other human beings.

But don't try to change the meaning of "net worth".
HomerJ,

<<You don't get to have your own definitions of words. >>

Respectfully, I disagreed.

<<Not if you want to communicate with other human beings.>>

By not agreeing to the normal definition of "Net Worth", I had communicated something. Whether people agree or disagree, that is something else.

In fact, I believe this form of communication is more useful. It forces people to think whether this definition makes sense for them.

KlangFool
In that case everyone should be renters so that net worth can be fairly assessed and compared to others. Otherwise, you are "poorer" with your paid off 5 million dollar house but no other investments than someone with $500 in their bank account.

What if your a landlord with 100 properties and several million dollars in equity, does that also not count in net worth according to your rules?

Or how about this idea, if your a renter, assess how much the place you rent would cost to buy and subtract that directly from your "net worth" which could make it negative if you have no other assets and rent a place worth 150k so therefore net worth is automatically -150k! That would make comparisons more fair if net worth is NOT supposed to include a owned home.
njdealguy,

<< In that case everyone should be renters so that net worth can be fairly assessed and compared to others. Otherwise, you are "poorer" with your paid off 5 million dollar house but no other investments than someone with $500 in their bank account.>>

Why is it useful to compare with others?

<<What if your a landlord with 100 properties and several million dollars in equity, does that also not count in net worth according to your rules?>>

We are discussing primary residence aka the house that you live in.

KlangFool
By this logic, are we still supposed to subtract a mortgage liability from net worth regardless of home value. So basically if live in a 500k home with 200k remaining on a mortgage and $1 million in other assets, the real net worth should be ($1 million - $200k) = $800k since the value of the home doesnt count in net worth (which otherwise calculates to 1.3MM)?

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