Valuing your home

[Frugal D]

How does everyone value your primary residence? I have no intention of selling anytime soon, but just for the monthly NW calculation I like to keep the value updated.

I've been using the median of Zillow, Trulia, and Realtor values and just curious if there are any better resources out there.

Thanks!

[Rezdent]

For yearly NW calculations, I use our county tax assessment value.  They are fairly stable and somewhat conservative.
I do not include primary residence for FI or retirement calculations.

[Terrestrial]

Looking at the comps of what's recently sold in the past 3-4 months.

[thedayisbrave]

Looking at the comps of what's recently sold in the past 3-4 months.

This.

Full disclosure: I'm a real estate agent, so I do this on a regular basis.

[Frugal D]

Looking at the comps of what's recently sold in the past 3-4 months.

This.

Full disclosure: I'm a real estate agent, so I do this on a regular basis.

Doesn't Zillow, Trulia, and Realtor do this for you in there values?

[Rural]

Looking at the comps of what's recently sold in the past 3-4 months.

This.

Full disclosure: I'm a real estate agent, so I do this on a regular basis.

This is ideal, but it only works if something sells, and if there's something comparable.


...Which means I have no idea what our place is "worth," and neither does anyone else. I think it only matters if you intend to sell.

[forummm]

It generally doesn't matter. I assume you can get within the ballpark. Any uncertainty about its value should be a very small percent of your usable NW (i.e. the part that's not tied up in your house) anyway by the time you are ready to FIRE.

[Terrestrial]

Doesn't Zillow, Trulia, and Realtor do this for you in there values?

Theoretically yes this is how it does it, but at least for Zillow i've never been all that impressed by it's 'accuracy'....in my experience often when i look at recent sales, including a house i just sold a couple months ago, they are frequently 5-10% different than what it shows, not an insignificant amount.  Also the more custom/unique the property is the less well a computer algorithm like Zillow works and the more thought needs to go into using comps and rational human thinking to do the valuation....though if it's just a normal house as one of a thousand in a subdivision or a fairly standard condo/townhouse zillow is probably closer than the aforementioned situation.

I have never used the other two, perhaps they are better.

I agree it doesn't necessarily make that much sense to do it monthly anyway, in most markets the monthly move in real estate isn't statistically all that significant because it all depends what sold during that period, RE has fairly low transaction volume compared to other assets like stocks, and they are a much less 'uniform' asset, a couple more high end/unique/fully renovated sales this month could boost ASP or per foot cost, a couple more foreclosures or distressed sales the next month could drop it...I update it about once or twice a year in my NW calc and do so based on comps, it doesn't take long.

[Terrestrial]

...Which means I have no idea what our place is "worth," and neither does anyone else. I think it only matters if you intend to sell.

Yes in the end it only matters if you intend to sell....but having a good gauge of how much you can realistically pull out of your house at a point in time can be beneficial in determining at what point you might want to sell, for a variety of reasons.   It doesn't have to be 'decide to sell ----> find out value'...there are reasons why it would be advantageous to 'know value ----> that's the driver to sell'.

I know there are plenty of people in high COL areas with substantial stored value in their property who may want to use that equity as part of their nest egg and downsize to a much lower COL area.   That's what my parents and many of their friends have done, you can sit on a $1.2M s-box you bought years ago in the peninsula that has gone up 6x in value, or you can move somewhere else to a nice 250k house and have enough left over to easily retire early.  How would you know when the time is right to make the move unless you know what the house is worth.

There are also people who continually evaluate the financial benefit of renting vs continuing to own....stored equity that would be freed for other investment is an important component of this comparison....it's difficult to evaluate which alternative is better and make the decision to sell (or not) if you don't know how much is sitting in the property.

[Frugal D]

I know there are plenty of people in high COL areas with substantial stored value in their property who may want to use that equity as part of their nest egg and downsize to a much lower COL area.   That's what my parents and many of their friends have done, you can sit on a $1.2M s-box you bought years ago in the peninsula that has gone up 6x in value, or you can move somewhere else to a nice 250k house and have enough left over to easily retire early.  How would you know when the time is right to make the move unless you know what the house is worth.

Thanks. This is the exact reason I like to keep a close eye on it. The majority of my NW is currently in the house and with the appreciation we're seeing in Seattle it might make sense to sell at some point and downsize.

[dragoncar]

I haven't decided yet but I'll probably update annually based on zillow and my own comps for sanity check.  But I'll subtract 5% for transaction costs.  Luckily my place has probably appreciated enough to cover transaction costs or the drop in me would be slightly depressing

[Axecleaver]

The estimate data points on Zillow and Trulia are all over the map. (Puns!) These sites are only able to compare apples-to-apples data on the comps, like lot size and number of bathrooms. They can't assess quality - for example, if one property has marble bathrooms and another has "contractor grade" bathrooms, or level of road noise. School district quality seems to be hard to incorporate.

Here's what Zillow says goes into its estimate: http://www.zillow.com/zestimate/

But, you can run your own comps pretty easily. Pick three properties similar to your home. This is tough in rural areas but usually pretty easy in the high COL areas. I've heard that it's ideal to choose one property that's a little better and another that's a little worse to bound your comps. Imagine if you were buying, and you saw those four properties, what you might decide to do.

Only use properties that actually sold, not listings. It's extremely time sensitive. Using property sales from six months ago may not be very accurate. Don't forget to take 5-6% out of the sale price for sales commissions, plus some for seller closing costs (tax stamps, lawyers, etc - every locality is different).

Some more articles on how inaccurate the estimates are:
http://www.financialsamurai.com/you-cant-trust-zillow-and-its-estimates/
http://birminghamappraisalblog.com/appraisal/so-just-how-accurate-is-the-zillow-zestimate-anyway/ (Comments are awesome on this post)
http://www.washingtonpost.com/blogs/where-we-live/wp/2014/06/10/how-accurate-is-zillows-zestimate-not-very-says-one-washington-area-agent/
This article says about half the estimates are within 5% of the sales price after a home sells.

[Terrestrial]

For fun I looked up the last few sales in my neighborhood on zillow, all in late June through July so within the past month or so.  Also these are estimates pulled today after these sales have occurred so they should likely be factored in to whatever algorithm it uses.

Prop 1 - Sales price:  575k.   Zillow:  526k.    ~49k low.
Prop 2 - Sales price:  400k.  Zillow: 457k.  ~57k high.
Prop 3 - Sales price: 550k.  Zillow: 505k.  ~ 45k low.
Prop 4 - Sales price: 460k.  Zillow: 428k.  ~32k low.

So to me they are bordering on useless...they aren't even all consistently high or low...it appears it tries to push everything toward a 'mean' for the neighborhood, thus underestimating the more expensive houses, and overestimating the cheaper ones.   Frankly...I could probably have guessed the value tighter than a 100k window (~50k high or low) knowing nothing more than the neighborhood and looking through a few pictures just because I look at all the new listings that come up for my own curiosity. 

So that's why I do my own comps....looking through the actual listings one can tell why some places were more than others past a generic size comparison and make adjustments accordingly...some have pools and great landscaping, some have larger lots or ones with great views, one of the houses looked done to the 9's and totally reno'ed, the cheap one looked like crap and was outdated inside, etc. 

The best thing about zillow is seeing the data of what is listed and what has sold in a quick format.  Their actual estimates are generally crap IMO.   The house I just sold was about as standard as you can get and thus should have been perfect for 'zillowing'.   Was a decent place but nothing extraordinary about it, almost the exact 'median' house for the neighborhood in terms of size/quality, and in the middle of a HUGE master planned community of over 3000 houses, so there were TONS of great comps...and it was still off by a little over 10% from the final sales price, but it ended up right around where I thought it would and the comps dictated it should when we decided to list it.  Had i just gone by the zillow to make that decision we probably wouldn't have even listed.

[Rural]

...Which means I have no idea what our place is "worth," and neither does anyone else. I think it only matters if you intend to sell.

Yes in the end it only matters if you intend to sell....but having a good gauge of how much you can realistically pull out of your house at a point in time can be beneficial in determining at what point you might want to sell, for a variety of reasons.   It doesn't have to be 'decide to sell ----> find out value'...there are reasons why it would be advantageous to 'know value ----> that's the driver to sell'.

I know there are plenty of people in high COL areas with substantial stored value in their property who may want to use that equity as part of their nest egg and downsize to a much lower COL area.   That's what my parents and many of their friends have done, you can sit on a $1.2M s-box you bought years ago in the peninsula that has gone up 6x in value, or you can move somewhere else to a nice 250k house and have enough left over to easily retire early.  How would you know when the time is right to make the move unless you know what the house is worth.

There are also people who continually evaluate the financial benefit of renting vs continuing to own....stored equity that would be freed for other investment is an important component of this comparison....it's difficult to evaluate which alternative is better and make the decision to sell (or not) if you don't know how much is sitting in the property.

All of which makes sense. We'll never sell; this is our retirement home in an extreme LCOL area. A good thing for us since comps are virtually impossible to come by - the only sales in the last two years within a 1-mile radius were foreclosures, and Zillow doesn't know there's a house here...


But for people who may sell someday, I agree it's a good idea to have a sense of the value and maybe to update it a couple of times a year if that's possible. I don't include it in net worth calculations, so I don't worry about it; for us, it's a reduction in our annual expenses and thus in what we need to save for retirement, and for that, we don't need to know its value.

[Drifterrider]

How does everyone value your primary residence? I have no intention of selling anytime soon, but just for the monthly NW calculation I like to keep the value updated.

I've been using the median of Zillow, Trulia, and Realtor values and just curious if there are any better resources out there.

Thanks!

I don't.  It is an expense.  I have to live somewhere. 

[LiveLean]

I follow a number of East Coast markets that I know well. Zillow can be quite high and quite low.

Comps from the last 3-4 months are best barometer. Which can be good and bad. My neighbor two doors down, comparable home, pretty much gave it away last month. Started off at what seemed like an aggressive price, then accepted a bid 20 percent less within 60 days. Has a trust fund wife and they built a house double the size two miles away. Over the last 15 years I saw them go through 3-year leases on every trendy clown car: Hummer, Lexus, Benz, Escalade, pickups of all makes and models, bigger the better as the size of the fishing boat grew.

So it didn't matter what they got out of this house.

Of course, were I to put my home on the market today, theirs would be the comp.

[jooles]

You local county property assessor's office will have the data on recent sales on your area.  Try poking around the assessor's website for your area.  You can get a good feel for the price per square foot in your area. 

[thedayisbrave]

Looking at the comps of what's recently sold in the past 3-4 months.

This.

Full disclosure: I'm a real estate agent, so I do this on a regular basis.

Doesn't Zillow, Trulia, and Realtor do this for you in there values?

Zillow et al. (Zillow especially) are notorious for their inaccuracies.  The "Zestimate" home estimate is an algorithm and doesn't take into account condition of the property, location, amenities, market flexibility, etc.  It's useless.

Another thing, sometimes the info on there about homes is off.  I sold one of my own properties in Charlotte and it shows up in Zillow as being sold for $80,000.. when in reality I sold it for $132,000.  Hate to be using that "comp" as a homeowner...

[Spork]

I just ballpark what we have into it.  I absolutely know this is inaccurate.  But we live in a rural area that doesn't have a lot of turnover and the houses are all over the place -- so comps are difficult as well.  (Within a mile you can find run down trailer houses and well kept 4000+ sqft homes on 100 acres of land.)  Zillow is way off, as is the county tax office.  Since they are off in my favor from a taxation standpoint, I really haven't tried to correct them.

We don't particularly plan on selling.  It's paid off and I just use that number as an extremely rough guess of what we could sell it for if something changed.