How do people determine the value of their homes for this calculation? Are sales and other costs considered?
Well, I have a very recent appraisal due to a refinance so I will use that appraisal. That said, we did a major improvement since the refinance that would add something to the value which I would estimate how much that would be (just based upon my recent familiarity with the market).
In our case net worth went down which I expected as it was a year of a lot of changes mostly due to buying a house and selling some other property.
The major factor in our decline in net worth was that 75% of the decline was attributable to income taxes owed on tax deferred money that we used to buy a house (no penalty - DH is retired).
In calculating net worth I think that most here add in the full value of their tax deferred accounts as if those accounts weren't tax deferred.
I know I did. So last year's number a year ago reflected that we owned no house at that time. I basically included the full value of our tax deferred accounts. During the year we bought a house and we sold some other property. After the dust cleared from the various things we did have an unusual amount of withdrawals from the tax deferred account which resulted in taxes owed. Theoretically paying those taxes is what most lowered our net worth. However, in reality those taxes (or the bulk of them) would have ultimately been paid when we withdrew greater amounts of money in future years. I would think that property in computing net worth you should estimate the tax deferred accounts less future tax liability.
The other 25% of the reduction in net worth was mostly related to things that we did as part of buying the new property that are one time expenses that didn't increase the value of the property (for example, putting in a fence). We also bought some new furniture which I didn't include as an asset (to determine net worth I included bank accounts, investments (including tax deferred), appraised value of the house, bluebook value for our cars. I didn't include the value of any other personal property although in reality some of it does have value but it is not enough to make a huge difference.
If we had estimated last years tax deferred accounts less future tax liability and I included the value of personal property (such as furniture) I would think our net worth between last year and this one would be almost flat.
