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If you include home equity in your net worth do you subtract closing costs, real estate commissions and any repairs needed to sell the home from the Redfin/Zillow estimate? I subtract about $100k in equity from my modest home to account for this in my Net Worth but I was wondering if others do the same?
Better to say it in percent! what does 100K mean with no context?! I do! NW logically should mean “liquidated NW”!
Yes, I exclude selling costs etc. this keeps you more level headed.
Depends. To brag on Blind, I use the full home equity (home value - mortgage owed) For my own planning, I use (home value - mortgage owed - cap gains tax - seling costs). My home value is 36% of my NW. Anyway it doesn’t matter for anything but your own understanding of your financial situation so you can plan better.
I like this approach. Less than 100k until 1 mil net worth if I were bragging on blind loL…
Official answer here: While the equity in your home is valuable and does equate to money, the portions of equity measured as it contributes to your Net worth only account for investment properties (non-owner-occupied), with some exceptions related to multiple family dwellings (house hackers). For instance, if you fill out a personal financial statement for a bank to get commercial lending, they will always exclude your personal property, as that is characterized as a living expense, therefore it doesn’t properly offset the debt service with income as an investment property would. That being said, some lenders will make 1 off exceptions to leverage the equity in your home in that calculation, if it is a substantial amount of equity, but usually only calculate up to 75% of it, since it doesn’t have rents coming in. With good credit, local banks frequently bend the rules of lending and net worth calculations, but as it relates to the original question, generally the answer is No. I hope that helps.
When it comes to bragging about my NW on blind, I usually just pick a number depending on how I’m feeling and just run with it. NW: $7M
😂😂😂. I wonder how many do the same?
Yes, depends for what purpose For FIRE - don't add any equity into nw. This is because my goal is to FIRE without having to consider selling/moving or having to margin it out. Hopefully it can at least track inflation and then if eventually I will sell (downsize when kids are gone?) only then it will be a nice boost, but that is a long while from now - for bragging rights, sure go ahead and include it :p - if you are seriously considering selling, then yes simulate what will happen -- closing costs, moving costs, taxes if applicable This is more-or-less what I do for stocks in NW too. I only deduct gains taxes if I'm actually planning on selling a chunk, otherwise it's all included as NW regardless of the unrecognized gains. Then, for the withdrawal rate, I can calculate the pre-tax withdrawal needed to get the desired after-tax $$. It isn't perfect because rebalancing if done will generate unknown income, and tax law changes all the time
Personally I subtract 6% for commissions, transfer taxes, and misc fees. That is probably a little high, but it’s just for estimating.
Dafuq who cares
It can be a huge percentage of someone’s net worth and people on blind love talking about net worth and reaching milestones