How Do You Value Your Home for Net Worth Purposes?

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ianferrel
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by ianferrel » Wed Mar 28, 2018 4:46 pm

I also average Zillow and Redfin. Both fluctuate, but the average is substantially more stable.

I do it because I like to occasionally look at a chart that's labeled "net worth" and has a line that goes up and to the right.

tim1999
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by tim1999 » Wed Mar 28, 2018 5:00 pm

Asset:
Current value based on recent neighborhood comps, minus selling expenses like realtor fees and transfer tax (6-7% of value around here).

Liability:
Mortgage balance, home equity loan balance if any, etc.

naclt
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by naclt » Wed Mar 28, 2018 6:05 pm

We use Zillow with a max value not to exceed the original purchase price (my conservative take...although it can be hard not to mark up in value when I get close to a net worth hurdle :D ).

PatrickA5
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by PatrickA5 » Wed Mar 28, 2018 6:15 pm

I use Zillow. It's low, but good enough. The only reason I calculate Net Worth is to keep track of where I stand financially over the years. Having 20 years of Net Worth is interesting (at least to me). No other reason.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by CedarWaxWing » Wed Mar 28, 2018 6:16 pm

I have it on a spreadsheet just to be "complete" in a sense, as I also have some rentals that I do count.

The house is untouchable unless we end up in a long term care situation. Up until then, the value of it is related to its being a place that I can be away from the rest of the world and run my life spend my time as I please... as long as DW says so.


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Re: How Do You Value Your Home for Net Worth Purposes?

Post by nisiprius » Wed Mar 28, 2018 6:23 pm

letsgobobby wrote:
Wed Mar 28, 2018 3:44 pm
nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
You have to begin by asking why you want to know your net worth and what you will use the number for. I've never been able to figure out any actual use for it other than to make me feel good and/or have an answer if someone asks me my net worth. Which I don't think has ever happened, in fact.

I can't think of any reason at all to know my house's value to closer than ±20% accuracy. And the real estate crash shows that it's crazy to suppose that there is any way to know it any closer than that. Other than to actually sell it and see what an actual buyer is actually willing to pay for it, of course.
It’s pretty darn important for estate planning, at least in some cases.
Is the "case" you're talking about, the case of an estate worth more than $10 million? Or am I missing something?
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randomizer
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by randomizer » Wed Mar 28, 2018 6:29 pm

I use some website once per year, around the anniversary date of the purchase, to get an approximate pulse on the change in value in the area. Obviously only going for a rough idea.

Then I calculate my net worth in two ways: net worth in terms of "liquid" or "investible" assets, and total net worth that includes home equity as well.

No plans to sell really, perhaps ever, so it really is just an intellectual exercise.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Clever_Username » Wed Mar 28, 2018 6:42 pm

I don't include the value, but no one ever asks me my net worth anyway.

I suppose I view it as very likely a non-negative number. I owe half a million dollars on the mortgage, give or take at most 20%. The house value is roughly three-quarter million dollars, give or take 20%. The net result is that it's likely a non-negative number, but it might as well be from the complex plane for all it does me. It's a large monthly expense really, something like 75-80% of my monthly expenditures.

The rest of my net worth is a trivial sum of remaining student loan debt that I don't care to get rid of, plus over a third of a million dollars in invested (non-real estate) assets (stocks, bonds, treasury things, orange juice futures, and some cash).

So it's positive, probably by a large amount, but not in any practical way just yet.

I suppose there's a very high probability that when I retire, the equity in my home will help with the down payment on a house in my new city plus either (a) a significantly smaller monthly payment for the home (if I go with a smaller or no loan) or (b) a good amount of investment assets when equity pulled out instead of rolled into new home.

But that's far enough away that I'll treat it as a windfall when and if it happens rather than counting on it.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by tmcc » Wed Mar 28, 2018 6:54 pm

house is part of net worth whether you like it or not. it may be an increase to decrease to net worth (net asset/net liability)

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by TravelforFun » Wed Mar 28, 2018 6:56 pm

By definition, net worth = everything you own minus everything you owe, so yes your home equity should be part of your net worth. A person who has $0 in his portfolio but has a paid-for-million-dollar home is a millionaire.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by letsgobobby » Wed Mar 28, 2018 7:30 pm

nisiprius wrote:
Wed Mar 28, 2018 6:23 pm
letsgobobby wrote:
Wed Mar 28, 2018 3:44 pm
nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
You have to begin by asking why you want to know your net worth and what you will use the number for. I've never been able to figure out any actual use for it other than to make me feel good and/or have an answer if someone asks me my net worth. Which I don't think has ever happened, in fact.

I can't think of any reason at all to know my house's value to closer than ±20% accuracy. And the real estate crash shows that it's crazy to suppose that there is any way to know it any closer than that. Other than to actually sell it and see what an actual buyer is actually willing to pay for it, of course.
It’s pretty darn important for estate planning, at least in some cases.
Is the "case" you're talking about, the case of an estate worth more than $10 million? Or am I missing something?
Some states have estate tax exemptions far lower than that.

remomnyc
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by remomnyc » Wed Mar 28, 2018 7:45 pm

Our place was easy to value because there were always similar sales that provided easy, accurate comparisons. I would include it in my net worth, but the number I really care about is investible assets that can generate income.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by EyeYield » Wed Mar 28, 2018 8:14 pm

I don’t think of my house as part of my net worth. I suppose if all my other assets were to go to zero, I would reconsider that thinking - like if I had to survive on a reverse mortgage.

If I did include it in my net worth, I would value it the same way I value my stock and bond portfolio. Take today’s value and divide by two. That’s the number I use to plan my budget.

This provides me with the real value under real bad circumstances - that can happen at any time to anybody.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Gnirk » Wed Mar 28, 2018 9:47 pm

If I were to calculate the value of our house to be part of our net worth, I would look at Zilllow, Redfin, and the county assessment which is supposed to be market value, pick a reasonable number, and deduct 10% for selling, closing, and excise tax costs. However, since we need no loans, we have no need to figure our net worth.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Jackson12 » Wed Mar 28, 2018 11:03 pm

We don't include it in net worth at this point ( nearing retirement)

If we did include it, we'd go with neighborhood comps for an equivalent home ( similar condition, square footage and age at that point in time . Home prices could be up or they could be down. We've seen that through the years.

We live in a low cost area ( which we love) but the downside is that homes appreciate very slowly and prices actually have stagnated in some years. So our home has an unknown value, varying from year to year and not always keeping up - or in some years barely keeping up- with inflation.

So if we inclused it in net worth we'd use a conservative number, below current market value. We'd also deduct the costs involved in selling it and deduct that from the current value.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by afan » Thu Mar 29, 2018 4:45 am

I just use zillow. It has done pretty well for housing prices in my neighborhood. I have a vague plan to move to a place farther from the city, larger lot, lower cost, when we retire. The sale would more than cover the cost of the new place. Since both would be in that same market, fluctuations in overall prices should not affect that.

Like it or not, when you die the government will demand an accounting of your networth and charge taxes on it. You need to know this figure and your tax laws to do estate planning.

If you are currently below the federal exclusion amount and your state either has no death tax or you are below the state limit then you need not worry about this FOR NOW. But you could move and even if you stay put tax laws change. Any responsible estate planning will take these possibilities into account.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by oldcomputerguy » Thu Mar 29, 2018 6:04 am

nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
In the area where I live, houses are supposed to be assessed for their full value so whenever I've wanted to know what our house is worth, I just use the number from our real estate tax bill. It's an objective number that should be accepted as being legitimate by whomever want to know your net worth for whatever reason, and it's not so different from Zillow as to make me think either of them is a crazy number. If what you paid for it is less than what it was assessed for, then, I agree, your conservative approach seems completely legitimate to me.
Interestingly, in my area, the number from Zillow is about 30% higher than the county's property tax appraisal (the appraisal, not the assessment; the assessment is 25% of the appraisal). When I think of it at all, I just use the lower number. Since I'm not even remotely considering selling, I suppose it's really irrelevant at this particular point. Down the road, if/when my wife and I need to downsize, then it'll become important, but not now.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by The Outsider » Thu Mar 29, 2018 7:12 am

EyeYield wrote:
Wed Mar 28, 2018 8:14 pm
I don’t think of my house as part of my net worth. I suppose if all my other assets were to go to zero, I would reconsider that thinking - like if I had to survive on a reverse mortgage.

If I did include it in my net worth, I would value it the same way I value my stock and bond portfolio. Take today’s value and divide by two. That’s the number I use to plan my budget.

This provides me with the real value under real bad circumstances - that can happen at any time to anybody.
That will be very helpful in my future analysis, thanks!

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Top99% » Thu Mar 29, 2018 7:27 am

I view my home as a place to live so I "calculate" the value as about 28x the net annual rental cost per year less the value I could get if I actually sold it. For net annual rental cost I subtract costs I currently pay that the landlord would pay if I rented. My rationale is the alternative would be to have an asset pool that would cover annual rent on an equivalent house at about a 3.5% withdrawal rate. Currently that asset pool is definitely larger than what I could get for the house if I sold it.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bgf » Thu Mar 29, 2018 7:47 am

i track my net worth because one of my personal financial goals is to consistently increase my net worth. hard to know if im making progress on my goal if i dont track it.

i subtract the balance of my mortgage from my purchase price and record my net worth monthly. my net worth goes up by the amount of my principal payment. pretty simple. i dont look at my house as an investment, but i also dont ignore it as an asset.

the volatility in my net worth comes from our portfolio and large expenses.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bogglizer » Thu Mar 29, 2018 8:49 am

Purchase price would never work for me. Every recent home I have purchased has been distressed in some way, and the value of the house pops up immediately after purchase. My current house was purchased for $1.05M (HCOL area) and was $1.4M on Zillow a few months later. Besides, using a fixed price for an appreciating asset is no more sensible that using it for a depreciating asset. We don't buy a car for $50K and then use that as the value ten years later.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Broken Man 1999 » Thu Mar 29, 2018 9:23 am

If I had to supply a serious net worth figure to someone I would see if recent comps in the neighborhood would suffice. If that avenue wasn't acceptable to whatever entity was seeking our net worth I suppose an official (not whipped out by a real estate salesperson) appraisal could certainly be offered.

We have had three sales in our small neighborhood in the last 3-4 years, and FWIW homes are increasing at a pretty good clip right now in our little region of central/west Florida.

Still, honestly I just don't think very often about the equity of our mortgage-free home. No plans to move or sell so long as our health allows us to stay.

So, the methods above might be some of ways I would get to the $$$ amount in the home equity portion of our net worth total.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bengal22 » Thu Mar 29, 2018 10:04 am

I include home value in my net worth. I use a conservative value and also subtract 6% for my cost to sell it. And I put my mortgage loan balance in my liability section.

I for one, think that net worth is the most important financial measurement that I track. It is the purest measurement of my financial health. Yes I track my "investable" performance(which I calculate as my mutual funds and cash). But I want to know my overall number which includes my assets and my liabilities. I realize that it is this total which is going to drive how much money I will have available at any given time. If I had a 5000K mortgage or if I have a 5000 mortgage it makes a big difference on what assets I can access. I truly do not understand why net worth is not important unless you have so much money that it ceases to be important. Or you have so much debt you don't want to know.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bgf » Thu Mar 29, 2018 10:15 am

bogglizer wrote:
Thu Mar 29, 2018 8:49 am
Purchase price would never work for me. Every recent home I have purchased has been distressed in some way, and the value of the house pops up immediately after purchase. My current house was purchased for $1.05M (HCOL area) and was $1.4M on Zillow a few months later. Besides, using a fixed price for an appreciating asset is no more sensible that using it for a depreciating asset. We don't buy a car for $50K and then use that as the value ten years later.
our situations are very different. we purchased our home 3 years ago, but purchase price is still accurate estimate of current market value for us. if anything, i would be conservative, which I am fine with.

i use kelley blue book for our cars, and it would be absurd to use car purchase price as an estimate for resale value. not at all comparable.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by michaeljc70 » Thu Mar 29, 2018 10:29 am

I use what I paid minus the balance on the mortgage plus any improvements. Since I do most of the improvements (basically remodeled the whole place) myself, I assume I'll get the money back if I sold. That gives me an amount that I know is less than I could sell it for, but that is okay. I'm not going to do a CMA every month to estimate it's true value. I found Zillow and the like can be highly inaccurate.

Using this method probably gives me an amount 60k less than market value but that isn't a big part of my NW so I don't care. As pointed out there are closing costs and commissions if you sell.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by El Greco » Thu Mar 29, 2018 10:49 am

I wouldn't count on Zillow or Redfin estimates as they are wildly inaccurate in my case. I've lived in my home for close to 30 years and have aggressively challenged my property tax assessments for 20 of those years. Thus, the Zillow estimates for my home are laughably low, about half it's actual market value. How do I determine actual value? I look up recent home sales of comparable properties in my area, apply common sense, and guess. Then, I lower my guess by about 10% and arrive at a conservative estimate. That's what I use for net worth purposes.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Clever_Username » Thu Mar 29, 2018 10:59 am

afan wrote:
Thu Mar 29, 2018 4:45 am
Like it or not, when you die the government will demand an accounting of your networth and charge taxes on it.
Yes, but they won't be making that demand of me... and if they do, it's unclear how they'd enforce it.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bigtex » Thu Mar 29, 2018 11:21 am

El Greco wrote:
Thu Mar 29, 2018 10:49 am
I wouldn't count on Zillow or Redfin estimates as they are wildly inaccurate in my case. I've lived in my home for close to 30 years and have aggressively challenged my property tax assessments for 20 of those years. Thus, the Zillow estimates for my home are laughably low, about half it's actual market value. How do I determine actual value? I look up recent home sales of comparable properties in my area, apply common sense, and guess. Then, I lower my guess by about 10% and arrive at a conservative estimate. That's what I use for net worth purposes.
I am the OP, and I too have wondered how challenging the tax assessed value can affect the market value of the home come selling time? Do you think a lower than normal tax assessment because of yearly challenging can actually hurt the selling price when that time comes?

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by The Outsider » Thu Mar 29, 2018 12:03 pm

bigtex wrote:
Thu Mar 29, 2018 11:21 am
El Greco wrote:
Thu Mar 29, 2018 10:49 am
I wouldn't count on Zillow or Redfin estimates as they are wildly inaccurate in my case. I've lived in my home for close to 30 years and have aggressively challenged my property tax assessments for 20 of those years. Thus, the Zillow estimates for my home are laughably low, about half it's actual market value. How do I determine actual value? I look up recent home sales of comparable properties in my area, apply common sense, and guess. Then, I lower my guess by about 10% and arrive at a conservative estimate. That's what I use for net worth purposes.
I am the OP, and I too have wondered how challenging the tax assessed value can affect the market value of the home come selling time? Do you think a lower than normal tax assessment because of yearly challenging can actually hurt the selling price when that time comes?
In my experience when I've bought homes I use it as point of negotiation to try to justify to seller why I'm offering less than sales price. Its NEVER been particularly useful or compelling in negotiations. As the seller of a few homes if its brought up by a potential purchaser its of course, without merit :) . In my location tax assessed value is rarely close to market.

Hot hot the market is and how motivated the seller is determines a homes sales price IMHO.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by goodenyou » Thu Mar 29, 2018 2:24 pm

This topic bubbles up every few months. I have paid off my home, and while I include it it my net worth for accounting purposes, I do not include the value of my home for decisions on retirement and spending. I am only interested in investible assets that are liquid (or somewhat liquid). I don't include my home value when calculating my "number" and SWR. Therefore, net worth, yes. Functional net worth, no.
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by PaddyMac » Thu Mar 29, 2018 2:42 pm

I use Zillow for value and then put the outstanding mortgage in Liabilities. It's just a rough guide as I don't plan to sell.

But I don't use it for retirement planning. Might come in useful to sell for long-term health care later on though.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by El Greco » Thu Mar 29, 2018 2:47 pm

by bigtex » Thu Mar 29, 2018 11:21 am

El Greco wrote: ↑Thu Mar 29, 2018 10:49 am
I wouldn't count on Zillow or Redfin estimates as they are wildly inaccurate in my case. I've lived in my home for close to 30 years and have aggressively challenged my property tax assessments for 20 of those years. Thus, the Zillow estimates for my home are laughably low, about half it's actual market value. How do I determine actual value? I look up recent home sales of comparable properties in my area, apply common sense, and guess. Then, I lower my guess by about 10% and arrive at a conservative estimate. That's what I use for net worth purposes.
I am the OP, and I too have wondered how challenging the tax assessed value can affect the market value of the home come selling time? Do you think a lower than normal tax assessment because of yearly challenging can actually hurt the selling price when that time comes?
@bigtex. I've sometimes wonder about it myself, but then I think this: If someone comes to look at my home and they are staring at an app on their phone to value it rather than looking at the actual house, I will suggest they shop for homes at the price point that Zillow is undervaluing my house at and see what kind of crap hole that money can actually buy. Then, they can come back and we'll talk real numbers. :D
I will also point out that due to my efforts at challenging my property taxes, they will enjoy much lower taxes for years, as my understanding is that it takes a long,long time for my town to reassess even after a home sale.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Meg77 » Thu Mar 29, 2018 2:56 pm

I value all my real estate holdings at cost. That's not accurate, especially for properties I bought many years ago, but I started doing that as an alternative to my original plan. I used to just assume 3% property appreciation per year, but since I had several rental properties and owned a home, my assumed appreciation was enough to muddle the impact of my net worth increases from saving and investing - which was really what I wanted to see. I tried estimating the value based on the most recent appraisal or some other method, but eventually I decided listing the values at cost is the simplest, most conservative approach. And it has the added benefit of giving my net worth a big "unexpected" boost whenever I sell a property, even after commissions and taxes for gains are taken out. :)
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Raryn » Thu Mar 29, 2018 2:57 pm

KlangFool wrote:
Wed Mar 28, 2018 2:16 pm
bigtex wrote:
Wed Mar 28, 2018 2:09 pm
KlangFool wrote:
Wed Mar 28, 2018 2:01 pm
bigtex wrote:
Wed Mar 28, 2018 1:55 pm
nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
You have to begin by asking why you want to know your net worth and what you will use the number for. I've never been able to figure out any actual use for it other than to make me feel good and/or have an answer if someone asks me my net worth. Which I don't think has ever happened, in fact.
bigtex,

No. It does work very well with the house.

A) Until you sell, you do not know how much the house is worth. Whatever number that you guess now is just the best guess.

B) So, you sell the house. But, you still need to live somewhere. Your expense will change.

C) The house generates no income. On top of that, you need money to service the mortgage and property tax.

A better way is to calculate the number as 25X the expense including the mortgage as the expense. Do not include the home equity in that number.

By the way, if you have to count home equity as part of your net worth, you are buying too much house.

KlangFool
What percent of net worth should the home make up? Under 10%?
bigtex,

Your net worth excluding the house should be 2.5 times the house purchase price. Or, the house's purchase price should be less than 40% of your net worth excluding the house.

Please note that I use house's purchase price instead of home equity.

KlangFool
Klangfool, your pessimism on the topic of homeownership is legendary, but this is ridiculous. If you use a "rule" that you can't buy a house until your net worth is 2.5x the purchase price, practically no one would *ever* be able to "afford" a house before retirement! There are tons of circumstances in which case it may make more sense to buy than rent depending on your job stability and local market conditions, and net worth (outside of availability of down payment and a leftover emergency fund) is a minimal consideration in determining them. You can (and have in the past) argue that there is no such thing as job stability and local market conditions are a guess at best, but you'd be wrong more often than not.

In addition, the house is an asset. You can't include the mortgage as an expense and not include the equity as an asset.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by WhiteMaxima » Thu Mar 29, 2018 3:17 pm

I value everything minus debt. Including pension and SS (lump sum value as of today). Most Americans, their resident house is their most valuable asset.
Last edited by WhiteMaxima on Thu Mar 29, 2018 4:08 pm, edited 1 time in total.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Phineas J. Whoopee » Thu Mar 29, 2018 3:33 pm

After 11 years I carry my dwelling on my books at the price the seller and I agreed to. I have no basis on which to estimate its value other than that. Perhaps its value has gone up, but it was newly-renovated when I bought it and now it has more than a decade of wear and tear. When I had a loan against it I also included it in my net worth, because net worth is assets minus liabilities.

I do not fool myself that my home is worth exactly that amount. I am conscious it is a very vague estimate.

Relative to the rent I was paying before I bought, break-even on cashflow alone is one year away. Then the apartment might as well have been free.

PJW

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by KlangFool » Thu Mar 29, 2018 3:34 pm

Raryn wrote:
Thu Mar 29, 2018 2:57 pm

Klangfool, your pessimism on the topic of homeownership is legendary, but this is ridiculous. If you use a "rule" that you can't buy a house until your net worth is 2.5x the purchase price, practically no one would *ever* be able to "afford" a house before retirement! There are tons of circumstances in which case it may make more sense to buy than rent depending on your job stability and local market conditions, and net worth (outside of availability of down payment and a leftover emergency fund) is a minimal consideration in determining them. You can (and have in the past) argue that there is no such thing as job stability and local market conditions are a guess at best, but you'd be wrong more often than not.

In addition, the house is an asset. You can't include the mortgage as an expense and not include the equity as an asset.
Raryn,

Your choice and your life.

<<practically no one would *ever* be able to "afford" a house before retirement! >>

1) And, why is that a bad thing? Between feeding a family versus feeding a house, which one should be more important?

2) I bought a house with my rule.

<< You can (and have in the past) argue that there is no such thing as job stability and local market conditions are a guess at best, but you'd be wrong more often than not.>>

This is a personal finance forum. Just make sure that you make the right decision for yourself. Whether I am right or wrong is irrelevant, you will have to live with your decision.

KlangFool
Last edited by KlangFool on Fri Mar 30, 2018 8:36 am, edited 1 time in total.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by scoreboard » Thu Mar 29, 2018 4:43 pm

Zillow is ridiculously inaccurate. I see it off by 10-20% all the time on recently sold properties.

I personally don't count my house towards my net worth. I suppose I would if my retirement plan including selling my house and renting.

quantAndHold
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by quantAndHold » Thu Mar 29, 2018 6:54 pm

Because I’m not planning on selling anytime soon, the number doesn’t need to be super accurate, so I just check Zillow about once a year and use that number. If I were planning on selling or refinancing, I would use a number that’s been vetted by a human who works in the real estate industry, then subtract out commissions, taxes, and fees.

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wabbajack
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by wabbajack » Thu Mar 29, 2018 9:11 pm

I think net worth is a good yardstick to measure whether a decision is worth thinking about. If you had a six-figure net worth, you shouldn't waste the effort to save $20 on groceries by driving across town or waiting for sales. Your mental energy is limited. The key here is in deciding which decisions are important based on net worth. With that in mind, I think it's important to have a close-ish idea of your net worth.

I think using Zillow is close enough for a home, but some discount factor should probably be applied to account for illiquid assets.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by StevieG72 » Thu Mar 29, 2018 9:19 pm

Zestimate from Zillow.

I do not subtract out mortgage initially, since that is listed as a liability.

I keep a balance sheet that is updated monthly.

Net worth is slightly north of nothing....
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Re: How Do You Value Your Home for Net Worth Purposes?

Post by confusedinvestor » Thu Mar 29, 2018 11:31 pm

Most financial planning software and big brokerages (schwab, merryll edge (not Lynch) uses SmartZip. Typicaly it is bit lower vs Zillow/RedFin.
You can ask you Bank to get a free Appriasal as well.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by White Coat Investor » Fri Mar 30, 2018 12:29 am

nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
You have to begin by asking why you want to know your net worth and what you will use the number for. I've never been able to figure out any actual use for it other than to make me feel good and/or have an answer if someone asks me my net worth. Which I don't think has ever happened, in fact.
The use for it is to focus you on what matters- net worth rather than income. I think people ought to calculate their net worth once a year and write it down somewhere. But after a decade of doing that, you've probably wrung all the benefit out of the exercise that you're going to.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by ryman554 » Fri Mar 30, 2018 9:23 am

bengal22 wrote:
Thu Mar 29, 2018 10:04 am
I include home value in my net worth. I use a conservative value and also subtract 6% for my cost to sell it. And I put my mortgage loan balance in my liability section.

I for one, think that net worth is the most important financial measurement that I track. It is the purest measurement of my financial health. Yes I track my "investable" performance(which I calculate as my mutual funds and cash). But I want to know my overall number which includes my assets and my liabilities. I realize that it is this total which is going to drive how much money I will have available at any given time. If I had a 5000K mortgage or if I have a 5000 mortgage it makes a big difference on what assets I can access. I truly do not understand why net worth is not important unless you have so much money that it ceases to be important. Or you have so much debt you don't want to know.
Precisely.

I will add that I can't wait to get out of the HCOL area I live in and get to a saner, rainier, not-so-HCOL area on the best coast. <flame away!!>

So, tracking current home value and NW, independently of "investible assets" is a useful metric to see how much money I can unlock when it gets closer to the time to get out of dodge. I imagine the same is true for those looking to downsize in retirement.

You can't eat your home, but you can leverage it to eat nicely in some other home.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by NotWhoYouThink » Fri Mar 30, 2018 9:55 am

ryman554 wrote:
Fri Mar 30, 2018 9:23 am
bengal22 wrote:
Thu Mar 29, 2018 10:04 am
I include home value in my net worth. I use a conservative value and also subtract 6% for my cost to sell it. And I put my mortgage loan balance in my liability section.

I for one, think that net worth is the most important financial measurement that I track. It is the purest measurement of my financial health. Yes I track my "investable" performance(which I calculate as my mutual funds and cash). But I want to know my overall number which includes my assets and my liabilities. I realize that it is this total which is going to drive how much money I will have available at any given time. If I had a 5000K mortgage or if I have a 5000 mortgage it makes a big difference on what assets I can access. I truly do not understand why net worth is not important unless you have so much money that it ceases to be important. Or you have so much debt you don't want to know.
Precisely.

I will add that I can't wait to get out of the HCOL area I live in and get to a saner, rainier, not-so-HCOL area on the best coast. <flame away!!>

So, tracking current home value and NW, independently of "investible assets" is a useful metric to see how much money I can unlock when it gets closer to the time to get out of dodge. I imagine the same is true for those looking to downsize in retirement.

You can't eat your home, but you can leverage it to eat nicely in some other home.
This.

For those who believe themselves to be in their "forever" home maybe it's not so important. But for those of us who know we've got at least one move in front of us (better location/closer to kids and grandkids) and maybe another one (CCRC or retirement or assisted living or nursing home), then it's important to keep track of total resources.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by 22twain » Fri Mar 30, 2018 9:58 am

Zillow and our county's assessors agree within about 20%, so I use Zillow because it's higher. 8-)

Not that it matters much anyway. As we enter retirement in a LCOL area, our paid-off, modest but adequate house comprises less than 5% of our net worth.
My investing princiPLEs do not include absolutely preserving princiPAL.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by bogglizer » Fri Mar 30, 2018 10:07 am

bgf wrote:
Thu Mar 29, 2018 10:15 am
bogglizer wrote:
Thu Mar 29, 2018 8:49 am
Purchase price would never work for me. Every recent home I have purchased has been distressed in some way, and the value of the house pops up immediately after purchase. My current house was purchased for $1.05M (HCOL area) and was $1.4M on Zillow a few months later. Besides, using a fixed price for an appreciating asset is no more sensible that using it for a depreciating asset. We don't buy a car for $50K and then use that as the value ten years later.
our situations are very different. we purchased our home 3 years ago, but purchase price is still accurate estimate of current market value for us. if anything, i would be conservative, which I am fine with.

i use kelley blue book for our cars, and it would be absurd to use car purchase price as an estimate for resale value. not at all comparable.
The point is that assets that can be marked to market should be. Houses are no different than cars; one you need to live in, the other to get elsewhere. The only difference from an accounting point of view is the sign of the depreciation/appreciation is assumed opposite.

Personally, as an engineer, I would prefer to accurately determine my net worth, and then put a margin on top of that. The answer may be similar to being conservative, but I would know more afterwards.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by LiterallyIronic » Fri Mar 30, 2018 10:18 am

wabbajack wrote:
Thu Mar 29, 2018 9:11 pm
I think net worth is a good yardstick to measure whether a decision is worth thinking about. If you had a six-figure net worth, you shouldn't waste the effort to save $20 on groceries by driving across town or waiting for sales.
I have a six figure net worth (retirement funds + home equity are about $125,000). And I certainly drive across down to fill up my gas tank at Costco and buy a dozen bags of cereal when Macey's has their sales. I don't think six-figure net worth is the right cut off for no longer worrying about saving $20. Twenty dollars is twenty dollars.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by GCD » Fri Mar 30, 2018 10:30 am

nisiprius wrote:
Wed Mar 28, 2018 1:35 pm
You have to begin by asking why you want to know your net worth and what you will use the number for. I've never been able to figure out any actual use for it other than to make me feel good and/or have an answer if someone asks me my net worth.
I agree with this. And with that in mind, I include the value of my house in my net worth. It is an asset, so it counts. There are other benchmarks besides net worth that wouldn't include it, like investable assets, liquid assets, etc.

I calculate the value by adding all the improvements at cost and adding them to the purchase price. For me it's a feel good, pat on the back number so I go big.

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Re: How Do You Value Your Home for Net Worth Purposes?

Post by Raryn » Fri Mar 30, 2018 10:34 am

KlangFool wrote:
Thu Mar 29, 2018 3:34 pm
Raryn wrote:
Thu Mar 29, 2018 2:57 pm

Klangfool, your pessimism on the topic of homeownership is legendary, but this is ridiculous. If you use a "rule" that you can't buy a house until your net worth is 2.5x the purchase price, practically no one would *ever* be able to "afford" a house before retirement! There are tons of circumstances in which case it may make more sense to buy than rent depending on your job stability and local market conditions, and net worth (outside of availability of down payment and a leftover emergency fund) is a minimal consideration in determining them. You can (and have in the past) argue that there is no such thing as job stability and local market conditions are a guess at best, but you'd be wrong more often than not.

In addition, the house is an asset. You can't include the mortgage as an expense and not include the equity as an asset.
Raryn,

Your choice and your life.

<<practically no one would *ever* be able to "afford" a house before retirement! >>

1) And, why is that a bad thing? Between feeding a family versus feeding a house, which one should be more important?

2) I bought a house with my rule.

<< You can (and have in the past) argue that there is no such thing as job stability and local market conditions are a guess at best, but you'd be wrong more often than not.>>

This is a personal finance forum. Just make sure that you make the right decision for yourself. Whether I am right or wrong is irrelevant, you will have to live with your decision.

KlangFool
You might have been able to do it, but your "rule" is still exceedingly conservative. The typical (still conservative, but reasonably so) rule of thumb is to not spend more than 28% of your gross income on PITI, which is much more reasonable for the majority of the population, and leaves the majority of your take home for feeding your family. Depending on the length of the mortgage, interest rates, etc, that comes out to a house worth somewhere around 3x your yearly income. Note, that that rule of thumb also doesn't include net worth in the slightest.

My home equity is somewhere around 20% of my net worth, but the actual value of the house is approximately equal to my total net worth (that is, all of my non-equity assets are approximately equal to my mortgage), and I'm far beyond most of my peers when it comes to retirement savings etc. I would never consider myself anywhere close to "house poor", but by your standards I'd need to triple or more my net worth to not be it. *shrug*

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