Author Topic: How do you calculate or estimate home value for net worth tracking?  (Read 1645 times)

Virtus3

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I'm curious how everyone comes up with their property values for net worth tracking purposes? I've been using Zillow but I feel it's been a bit liberal in it's estimate - up over $76k from purchase price in late January this year.

It feels disingenuous to me as it's really inflating my numbers. Looking at comps on the market in our area I would assume that the value is up a non-insignificant amount but I wouldn't even know where to begin to get a semi-accurate estimate. I was toying with the idea of just leaving it fixed at our purchase price and then I would get a better feel of just the effects of our savings and the market; especially as we plan for this to be our long-term home until the kids are out in 15+ years. Any thoughts?

Thanks!

K_in_the_kitchen

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #1 on: December 20, 2021, 01:40:49 PM »
We've never included our home value in our net worth.  I suppose we might when we are old enough to consider selling and not buying another house, but until then it seems moot.  We live in it now, and if we were to sell it we'd have to use the proceeds to buy another house, and unless we move out of the area we wouldn't expect to come out ahead.  If we did sell and buy something less expensive we could add the difference to our net worth at that point in time.

RedFin estimates us at $645K (with a range of $633K - $697K), Zillow at $627 (range of $577K - $677K).  I've read that RedFin is more accurate than Zillow, and in this case I would agree in terms of the range.  The most recent sale in our neighborhood was $540K for a 2/1 at 1000 square feet, and we are a 3/3 with 1700 square feet and a larger lot, along with a breakfast room, laundry room (that house has it in the kitchen), front porch, larger driveway, larger garage, and a porte-cochere.  We're farther from the main road, so that house is noisier.

But we remember 2005, when our house value went up to $500K.  It seemed astounding at the time -- and then of course it dropped back down to like $350K, which was still significantly more than the $189K we paid in 2000.  So I would ignore these super high markets for the purpose of calculating your net worth.  If was being forced to include our house, I would probably choose a really safe number, like $500K, which is a little lower than it was valued pre-pandemic.

Fishindude

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #2 on: December 20, 2021, 02:27:18 PM »
If you own your home free and clear or have equity, it is indeed part of your net worth.  What are you calculating net worth for?   

In business, it's not uncommon to prepare a personal financial statement for banking, bonding, etc.   Probably best in these cases to be pretty accurate and consistent on where you establish real estate values, etc.   

If it's just for personal tracking, it matters little, but if you want to see how things go over a period of time, you should use the same methodology each time to establish values.  Nothing wrong with using Zillow.

Morning Glory

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #3 on: December 20, 2021, 02:30:52 PM »
Zillow was all over the place when I had a rural property so I just used the appraisal from the last refi.

NotJen

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #4 on: December 20, 2021, 03:02:37 PM »
I was toying with the idea of just leaving it fixed at our purchase price and then I would get a better feel of just the effects of our savings and the market; especially as we plan for this to be our long-term home until the kids are out in 15+ years. Any thoughts?

This is exactly what I did.  I ignored the value for a while after I purchased it, then I started tracking NW when I joined MMM and I just included it at the purchase price.  That was pretty accurate for most of my homeowner days (15 yrs), since prices in my neighborhood weren't changing that much, and after transaction costs I hoped I could get that.

Then I sold this year and netted $75k more than my estimate.  NW bonus!

Even though I knew I wanted sell my house (and rent for a while), I didn't know when that was going to happen.  So, I calculated 2 FIRE numbers - one based on investments/cash only (expenses assumed I would stay in the paid-off house) and one based on NW (expenses assumed I would sell my house and rent).  I made my FIRE decisions based on both numbers.

dandarc

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #5 on: December 20, 2021, 03:09:19 PM »
Zillow was all over the place when I had a rural property so I just used the appraisal from the last refi.
This - unless there's a transaction, very hard to value real estate. If a bank is willing to loan against that value, that counts as a transaction to me.

secondcor521

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #6 on: December 20, 2021, 04:44:21 PM »
Quarterly I increase the Quicken value of my home by 1%, because my understanding is that over the very long run, houses go up about 4% a year.

I then use USAA Home Value Monitoring, which seems to be on the conservative side, to adjust up or down periodically to reflect what my local market happens to be doing.  Back in 2006 through about 2010, the 1% quarterly adjustment was too optimistic and I had to lower the Quicken value.  The last year or two the 1% quarterly adjustment has been too pessimistic and I've had to raise the Quicken value.

So I basically try to keep a conservative but roughly reasonable value on it.

Like most, I include my paid off home as an asset on my net worth statement, but I exclude it from my FIRE stash.  It does get indirectly included in my FIRE situation in the sense that my expenses don't include rent or mortgage payments; just property taxes, repairs, and maintenance.  This enables me to have low cash flow and therefore low taxable income which does result in various tax benefits which I think have been pretty beneficial to me over the past six years or so in early FIRE.

bryan995

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #7 on: December 20, 2021, 05:57:26 PM »
Zillow.

For us itís pretty accurate. Maybe 50k below market (only because it keeps marching upwards so fast). But lots of recent sales help keep it accurate.

Jack0Life

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #8 on: December 20, 2021, 06:40:29 PM »
I do try to put an accurate home value on my NW. I mean everyone put an accurate value on their retirement account why not your own home ?? You're not accessing your retirement funds any time soon so it goes up and down just like a house value might until you sell it.
i usually look up Zillow and look around all the houses in the neighborhood that's been recently sold and you can guess a pretty accurate home value. I take that and minus 4%(you can sell your house with RedFin for 3.5) and that's my home value.

Sandi_k

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #9 on: December 21, 2021, 12:27:20 AM »
I get values from the Big Three: Zillow, Redfin and Realtor.com - and then I average the three values. Redfin is typically middle of the road, Zillow is high, and Realtor.com is lowest.

Good enough.

seattlecyclone

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #10 on: December 21, 2021, 12:38:25 AM »
When I bought my house Redfin's estimate was closer to the purchase price than Zillow's, so I've just been using Redfin's estimate ever since. Real estate is something where the value depends very much on the specifics of the interested buyers at the time you're interested in selling, but I feel like any of the big estimation sites will capture the general trend well enough if you're just tracking for your own scorekeeping and not intending to sell in the near future.

MrThatsDifferent

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #11 on: December 21, 2021, 04:20:59 AM »
I only calculate what Iíve paid into the mortgage that comes off the principle. That Iím sure of as my money. I donít add the appreciation because I wonít know that for sure until I sell.

Dave1442397

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #12 on: December 21, 2021, 07:06:17 AM »
Zillow's pretty close in my area. Redfin has my house at around 20% higher than Zillow, and that I don't believe.

I take 10% off the Zillow valuation for presale repairs and estimated transaction costs when selling, and that's the value I use for my net worth calculation.

I don't see the point of not including home equity in your net worth calculation.

Metalcat

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #13 on: December 21, 2021, 07:14:27 AM »
For me it's pretty easy. I live in a condo complex where identical units are sold often, so I could track it if I wanted to. But I don't calculate NW because I never plan to sell this unit. I may rent it out, but won't sell, so the value doesn't really matter.

Virtus3

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #14 on: December 21, 2021, 09:47:46 AM »
Thanks for all of the responses!

I was looking for something simple and conservative as we plan to stay in the house 15+ years. I think I'm going to use Realtor's estimate for 2% growth (calculated as 0.5% per quarter) for the time being. Will reevaluate as needed or will bump up/down if we get a reappraisal.


Sibley

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #15 on: December 27, 2021, 10:45:12 AM »
I use tax basis. My house isn't an investment, it's where I live, so I'm not all that interested in including it in my net worth. But I didn't want to add the mortgage and not add the house. As a side benefit, whenever I do ultimately sell the house, the tax basis is gonna be easy to figure out.

Queen Frugal

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #16 on: December 27, 2021, 11:03:19 AM »
I update my home's value based o the tax value once a year.  It's not entirely accurate but it's easy.

lhamo

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #17 on: December 27, 2021, 11:15:27 AM »
Mint uses Zillow so that is my default.

DadJokes

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #18 on: December 27, 2021, 11:19:07 AM »
National home appreciation rates generally hover between 3-4% per year (based on a handful of different sites I looked at when asking myself this question a couple years ago). As such, I ignore Zillow/Redfin/whatever and just value my own home as appreciating by 3% per year.

I hope to be pleasantly surprised whenever we do eventually sell the house to downsize.

legalstache

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #19 on: December 28, 2021, 04:31:57 PM »
In the past I've used the average of the Zillow and Redfin estimates, but recently I've wondered if that's a little too generous. We've had some comparable home sales in our neighborhood that suggest the Zillow/Redfin numbers are at least in the ballpark, though. I guess I could always average in the county assessed tax value too to lower the number a little bit.

merlin7676

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #20 on: December 29, 2021, 03:20:14 PM »
I don't include it in my net worth.

It's a fixed asset that only becomes tangible if I sell.   If I do sell, then that money will go towards the next place I live.

So unless I sell and live in a van down by the river, it's not liquid money that will go towards my net worth retirement money (other than not having a mortgage)

HPstache

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Re: How do you calculate or estimate home value for net worth tracking?
« Reply #21 on: December 29, 2021, 03:26:04 PM »
I like the idea of just adding 3-4% every year from the purchase date to get a reasonable idea of what my home value might be over the long run regardless of if the market at that particular time is at a high or a low.  On the other hand... using that Zillow value makes updating net worth way more fun!