Author Topic: Do you use Zillow Zestimate when calculating your total Net Worth?  (Read 2358 times)

ender

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #50 on: July 05, 2021, 07:25:08 AM »
I discount our house about 7-8% off what I think it's value is, to reflect actual equity in a house post commission.

Or more realistically I put what it was when we bought it then never update it :-)

BudgetSlasher

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #51 on: July 05, 2021, 07:31:21 AM »
For the house, when I update it, I tend to used the purchase price multiplied by the percent change in average home sale in the area between the date of purchase and the date of the calculation.

I do not trust Zillow's numbers in the least. I do not know if it is lack of data in our area but things will be all over the place. Huge jumps/drops in value in 1 month (during more stable times), adjacent houses where one is clearly more desirable than the other priced the opposite of expected, and zillow estimates jumping when a home is put on the market to something close to the listing price.

NorCal

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #52 on: July 05, 2021, 09:13:10 AM »
What are you trying to gain by constantly updating your house value?  I don't see the point for most people.

I guess I could see the point if you're planning to cash out home equity to downsize.  But otherwise it's not a liquid asset that you can really use to accelerate FIRE plans. 

I'm planning to stay in my house for 20+ years.  I keep my home valued at-cost in my spreadsheet just to avoid confusing it with my investable assets that are constantly changing in their utility for FIRE.  Sure, I could add ~$150K of net worth gains since I bought the house, but that doesn't get me a day closer to FIRE.

Note: If you dive into the business accounting world, many business assets are valued similarly at-cost and are not frequently updated for mark-to-market valuations.  The biggest difference would be that buildings (but not land) are depreciated over time.

To know when you can officially call yourself a 'millionaire ', duh!

Exactly! :)

I didnít factor that in, and it fully explains why I donít care. I bought my house about two years after I hit the millionaire mark. I might have cared more if I bought the house earlier.

SimpleCycle

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #53 on: July 05, 2021, 09:40:03 AM »
I find value in calculating my total net worth, if only because it makes me think about the options I have other than "stay in this house until I die".  But the estimates are only as good as the data they have and the algorithms they use, so I take it with a grain of salt.

My spreadsheet has three "total net worth" numbers - the "conservative" estimate using our refi appraisal, the "liberal" estimate using the Zillow Zestimate, and an average of the two I call "split the difference".  I use "split the difference" as our official number for threads on here and what I think of in my mind as our total net worth.

In the end, none of these numbers are absolute, so I just use what is most useful to me.

foghorn

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #54 on: July 05, 2021, 11:37:01 AM »
Yes, I do. 

Every month I update my Net Worth in a spreadsheet I have kept current since 2005.  I have a Column for all financial investments and a column for the house value (using Zillow).  I realize it is not a perfect number, but it does give me trend over time.  I add up these two Columns to give me a good idea of my Total Net Worth.  The house is about 9% of my total Net Worth.  House is paid for.

I do not understand why people would not track home value (with whatever tool they like best) in a Net Worth calculation.  If I were to sell my home (become a renter) and put the proceeds into the bank, I would then count those proceeds towards my net worth.  Because those dollars are a in a less liquid form of a home does not mean they do not exist.  Also, if I died tomorrow and my estate was liquidated and given to my heirs - the value of the home would also count as part of my estate. 

seattlecyclone

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #55 on: July 05, 2021, 12:22:57 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

Malcat

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #56 on: July 05, 2021, 12:23:28 PM »
Yes, I do. 

Every month I update my Net Worth in a spreadsheet I have kept current since 2005.  I have a Column for all financial investments and a column for the house value (using Zillow).  I realize it is not a perfect number, but it does give me trend over time.  I add up these two Columns to give me a good idea of my Total Net Worth.  The house is about 9% of my total Net Worth.  House is paid for.

I do not understand why people would not track home value (with whatever tool they like best) in a Net Worth calculation.  If I were to sell my home (become a renter) and put the proceeds into the bank, I would then count those proceeds towards my net worth.  Because those dollars are a in a less liquid form of a home does not mean they do not exist.  Also, if I died tomorrow and my estate was liquidated and given to my heirs - the value of the home would also count as part of my estate.

I don't ignore my home value, I just don't include it in my NW because it's not meaningful unless and until I extract equity from it.
I don't just look at it as an asset because no matter what, I need to live somewhere, and the decision to move is usually dictated by life factors and not primarily financial factors.

For example, my current house has jumped a lot in value, but not as much as the other houses in my area. So although my NW has increased, my buying power has actually decreased in terms of housing.

I would have to relocate to a lower cost area in order to actually gain any wealth from my home equity increase, which is a huge lifestyle choice, which I'm very unlikely to do, since DH's career and my medical team are here.

So unless someone's life circumstances actually permit them to easily downsize or relocate or rent indefinitely in a market where rent stays cheaper for some reason, then the equity in a house is essentially meaningless, even if they do sell.

In terms of renting, I still conceptualize it as housing cost. So say I have a paid off house and rentals in my area are about the same cost as ownership, then selling my house will essentially just fund renting. I'm still not ahead unless I find a way to rent for less.

Regardless, I stay on top of my house value, but only relative to alternative housing options in the event that that I find an attractive way to pull out equity.

Only then, only if it *makes sense* to profit from my equity gains, will I add it to my wealth level because until then it's just potential.
So it's not that I ignore my house value, I just don't mentally lump it in with my wealth because it's not useful to me as wealth.

That said, as I mentioned, my condo will never appreciate relative to the market. I basically can't downsize because it's a one bedroom apartment, and it would be more expensive in any other city in the country. So in my particular case, the only way I could feasibly tap into my equity would be a HELOC or refinance, which I might consider, but that wouldn't add to my NW, that would allow me to do some leveraged investing, which could raise (or lower) my NW.

Now, I *did* recently cash out equity in my last place when I downsized to this place. So I'm not talking theoretical, I already did this. When I lived in the old place, the equity was useless to me. Totally useless. There's also no way I would have downsized and liquidated it unless I actually wanted to live in the smaller, cheaper place. Luckily for me, the smaller place was always my dream home, so it was a no brainer to cash out when I could.

I don't think either approach is wrong, it's all just mental math, but I thought I would share how I still closely track my home value, but don't consider it as part of my overall wealth unless the lifestyle factors line up to actually access it. Which in my case, they did.

Malcat

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #57 on: July 05, 2021, 12:26:17 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

But yes, obviously I account for taxes when I factor in how much I'll need to take out of a tax deferred account. I can't say "I'll need 40K" and then only take out 40K.

It's the same way that if I sell something through Etsy and they take a cut, I don't consider the sale price to be my take, I consider the net sale price to be my take.

Home value minus costs is simply the estimate of the net sale value.

But yeah, all costs should be factored in to everything.

seattlecyclone

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #58 on: July 05, 2021, 12:52:17 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.

BlueHouse

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #59 on: July 05, 2021, 01:23:30 PM »
I'm another one who doesn't include home equity in my net worth.  I just act like I'm renting, then when I eventually sell, I'll have a nice surprise. 
Of course, in my mind I am always aware that I could get $1M out of my house, and that's what keeps me sane whenever I think "can I really live off my investments for the rest of my life?" 

I actually do count enough of the equity to zero out the remaining mortgage loan.  So I sort of pretend both sides of that equation don't exist. 

I plan to live/retire off my liquid investments, so that's the number I pay attention to. 

ender

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #60 on: July 05, 2021, 01:49:43 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.

I plan on converting my whole tIRA tax free via Roth conversions, so no, I do not worry too much about taxes when considering the balance ;-)

Radagast

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #61 on: July 05, 2021, 01:50:18 PM »
Starting today, I will update our net worth using the average of 2 or 3 real estate websites *0.9 - outstanding loan as discussed in this thread. So, good discussion!

Here is why I find that useful. It lets us know if we should:
be trying to do a cash out refinance (interest rate refinance is another matter)
Sell either house
Rent out both houses completely and buy a third
Sell both houses and rent
Uh reverse mortgage I guess? Doesn't seem realistic
Accept jobs elsewhere
Do nothing

Today I realized for the first time out two properties would gross $1M, and net $350k, if we sold both. Our monthly rent would gross $5500, and net $2500, if we left and rented both completely. They are in nearby areas with completely unrelated economies. I am actually surprised by some of those numbers, which is why I think this has value going forward. I have been adding up NW every three months.

Radagast

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #62 on: July 05, 2021, 01:54:14 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.
I decided to use 0.9 multiplier, but would not calc taxes on an IRA. Why: I could sell the house anytime with no cap gains and no penalty. It is actionable. Who knows what tax rate an IRA would be at a decade in the future, or whether I could do a Roth conversion  ladder. Discounting the IRA is not actionable for at least another 5 years.

In case if using the number to refinance, I prefer to be on the safe side as I think in general it is better to be patient and conservative, so *0.9 achieves those goals.

Psychstache

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #63 on: July 05, 2021, 01:57:55 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.

I think the tax as living expense makes more sense, but another difference is that there are simple maneuvers I can take to minimize/eliminate my tax burden when I'm in the withdrawal stage with the current rules in place. With the current state of affairs if I want access to my home equity, it's going to be through the sale of my home which virtually requires me to deal with a member of the blazer cartel broker and agent who are gonna take their 6%.

Either way, it is mostly academic for me. I do it because it is already part of my NW spreadsheet, so calculating my net worth with and without home equity takes virtually no effort, so I keep it up for the data.

rmorris50

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #64 on: July 05, 2021, 02:08:35 PM »
The whole original question shows that many people try to use their NW as a FIRE calc, and this results in them modifying their NW in the process to do that FIRE calc. NW is NW, and catalogs all the assets and liabilities that you have as part your estate. And managing that estate is much more than just a FIRE calc.

A FIRE calc is a cash flow analysis that certain assets of yours will help fund, but probably not fully. For example you can have social security, pension with no cash value, alimony, heck maybe your child even sends you extra money every month you want to reflect. But those arenít assets in your NW.

NW and cash flow analysis are two different things and in my mind itís cleaner to keep the two separate.

And yes I use Zillow since I can link it into my advisorís NW tracker and have it automatically updated. And it seems like a reasonable estimate of the value of my house.


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Malcat

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #65 on: July 05, 2021, 08:08:46 PM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.

Did you read my whole reply?


seattlecyclone

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #66 on: July 06, 2021, 12:50:45 AM »
I've seen several people say they discount their home value by 6% or more to account for realtor commissions and other transaction costs. For those in that boat, do you also discount your IRA by some percentage to account for the tax you'll pay to access that money?

That's not a fair comparison.

I think it's a perfectly fair comparison. If you're going to say "my $1 million house only counts $920k toward my net worth because of closing costs," seems like you'd also need to say "my $1 million IRA only counts $850k toward my net worth because I expect to pay an average of 15% income tax on my withdrawals."

Of course it makes no sense to completely ignore these factors when planning for the future. For purposes of net worth tracking I just haven't seen many people do this kind of discounting across their whole portfolio. The gross asset value seems to be the more common metric for net worth.

Did you read my whole reply?

Yes.

Finances_With_Purpose

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #67 on: July 06, 2021, 11:23:19 PM »
Yes I use it. Otherwise there would be no way to track the NW effect of paying down my 15y mortgage. Itís also important to understand how Iím allocating my assets. I.e. Where am I on the spectrum of house poor vs. leveraging my home equity into the stock market? I see a ton of posts here about ďcan I retire with $500k liquid and $1M home equity?Ē Well, no, you canít. But if you sell that house and move to a LCOL area youíre set for life.

 @Dave1442397 has a good point about subtracting closing costs from the zestimate to arrive at a cash in hand value that is relevant to decisions like moving, switching to being a renter, or doing the van life thing.

This.  I do the same thing for the same reason, but I don't try to keep the value updated as closely since I don't care as much and don't plan to cash it out soon.  Besides, it feels sort of other-worldly if I were to actually put in a realistic estimate of home value after the wild ride the past two years. 

JJ-

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #68 on: July 07, 2021, 08:05:39 AM »
I've been waiting on replying to this because a) I include the Zillow value and b) had a pending appraisal for a cash out refi.

I didn't know that redfin and realtor had values. Zillows latest valuation of our house was $620k, but redfin and realtor were $540k and $555k. So based on this thread I would have expected it to land somewhere in the middle.

Appraisal came in at $650k. Shrug.

Finances_With_Purpose

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Re: Do you use Zillow Zestimate when calculating your total Net Worth?
« Reply #69 on: July 07, 2021, 09:44:55 AM »
What are you trying to gain by constantly updating your house value?  I don't see the point for most people.

I guess I could see the point if you're planning to cash out home equity to downsize.  But otherwise it's not a liquid asset that you can really use to accelerate FIRE plans. 

I'm planning to stay in my house for 20+ years.  I keep my home valued at-cost in my spreadsheet just to avoid confusing it with my investable assets that are constantly changing in their utility for FIRE.  Sure, I could add ~$150K of net worth gains since I bought the house, but that doesn't get me a day closer to FIRE.

Note: If you dive into the business accounting world, many business assets are valued similarly at-cost and are not frequently updated for mark-to-market valuations.  The biggest difference would be that buildings (but not land) are depreciated over time.

To know when you can officially call yourself a 'millionaire ', duh!

Seriously.  Turns out that our house is the best investment we've made in recent history.  Just nuts.