Tracking real estate and networth

Tracking real estate and networth

Tracking your net worth is one of the most important things to do on your journey to financial independence. But tracking property gets tricky….if you aren’t a real estate master.

There are mainly two schools of thought.

Common practice

Zillow/Trulia Average

Basically you are taking the estimated list price from all of the major listing sites, averaging, and using that as your property value. Some tend to be high while others tend to be lower so it is the best guess if you want a realistic…ish value.

The downside being that it can be time consuming and potentially very wrong. Like many realtors will tell you, these sites don’t see the inside of the house. They can’t tell you what’s really going on inside like, if there are updated rooms and such. Also, they are just algorithms that are only as smart as what they *think* they know about the property. You can claim the property, if you make an account, and fix some of the corrections but it doesn’t fix everything.

Purchase Price

Well this one is easy huh? What did you buy the place for? Done. Well…that’s fine except after 5, 10, 15 years…the price is very very different. You could calculate inflation and such but after a while that isn’t exactly right either.

My Way

Property tax statement (pre-deductions)

I do this because:

  1. I only have to do it once a year
    1. Less work for me
    2. Updated value every year
  2. Its slightly more accurate.
    1. A real person stops out at my house and they know more and more accurate information about my house.
    2. The person is estimating the area houses at the same time as well.

There are downsides. These can tend to be lower than real market value, unless you bought your house from foreclosure like me. This can play to your benefit though since you don’t truly know your house’s worth until someone wants to buy it. Overestimating can be far more damaging than underestimating when it comes to net worth. Your net worth can spike once a year or you can average it out over the year. It is a snapshot of your house at one given time of the market and that is your value for the entire year.

No matter what tracking, net worth is very important to making sure you are making progress on your financial journey and it helps to be consistent in how you track it.

Do you track your property values differently? What do you think of this style?

11 thoughts on “Tracking real estate and networth

  1. We purposely estimate it low using the assessed value from a property tax perspective and/or slightly corrected for purchase price/performed renovations/national indexation numbers. Depends on the time since purchase and general state of the property (we actually have 5),

  2. The tax values here in my area are WAY lower than actual sale prices. As for Zillow… I just checked and it doesn’t have an estimate for my house. BUT… it shows other recent sales in this area of similar houses, so I can get a pretty good estimate that way by reviewing the $/ft closing prices.

  3. I shouldn’t hate on Zillow so much because they are from Seattle but Zillow is off a lot. They’re not a real MLS so their estimates are way off. When Zillow CEO sold his own house, Zillow got the details of his house wrong. It was on SeattleBubble and I couldn’t stop laughing! For a darn close estimate look at Redfin’s (I hate them too but their estimates are dead on.)

  4. I don’t worry so much about my house value when it comes to net worth tracking. Not like I’m going to sale my house and start renting an apartment so the cash is kind of tied up. I just use personal capital which uses Zillow and just kind of take it with a grain of salt.

  5. We don’t track our personal residence all that closely. We refinanced last year, so I’m using the value of the appraisal at this point. Property values continue to go up in my area, so I think it’s safe to use the appraisal number. We figure net worth with both the house and without.

    1. I don’t trust bank appraisers. Even after the crash they were still just appraising based on the sale price :-/

      Do you factor the mortgage in with the networth that doesn’t include the house value?
      Out of curiosity why do you track both?

  6. There are usually a couple of homes in my neighborhood each year that gives me a pretty good idea of what homes are selling for. So I usually guesstimate that way. It’s not perfect but it works better than Zillow 🙂

  7. Since we have the debt and it’s what our property tax is calculated based on, I do include the appraised value in our net worth, but I also ignore the property values category in our net worth overall because it’s only “worth” something to us if we sell the property.

  8. I was just asking the same thing about valuing real estate. I’ve always gone conservative, leaving it at the purchase price or last appraisal. Of course, my first property was purchased just before the downturn and has not gained much above that price. No major remodels since it had been remodeled just before I bought it.

    Now on my second property (now my primary residence) I’m getting into home improvements. I think I should take that into consideration. But I’m at a cross-roads on how to do so. I’m thinking of 80% of the remodel cost goes into increasing the home’s value for my calculations (and I’m outsourcing all work on the projects. Don’t have time nor expertise to do these major jobs)

    PS After your comment on my post, I coincidentally got this year’s property tax assessment. It’s 20% lower than the appraisal I just got a few months ago. The appraiser came in and looked at the house. The county tax assessor does not come inside to look. Based on some recent sales in my neighborhood, I think the appraiser is closer than the tax assessor.

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