Accounting for Your Home’s Value in Quicken (or the Like)

Quick question to all of you out there that track your finances in Quicken, MS Money, or something similar… Do you keep track of your home’s value in your software package of choice? Or do you track it separate from the rest of your finances?

I’ve always been a big proponent of tracking net investable assets as opposed to actual net worth, but I’ve recently been re-thinking this. The main reason for this change of heart is that we’re currently renovating our house to the tune of roughly $50k. Given that our home’s value will be increasing as a result of these renovations, it seems odd to treat that money as if it simply disappeared.

I see that Quicken has an option for tracking homes and other assets, but I’ve never messed around with it. In short, I’m thinking of going back and creating an account for our first house, and populating it with values ranging from the initial purchase price to the eventual sale price (I’ll basically just interpolate the values in between). For our current house, I’d probably play it somewhat conservative and just track the assessed value, which tends to lag behind market values in our area.

Anyway, I just wanted to get your thoughts on how best to handle this.

12 Responses to “Accounting for Your Home’s Value in Quicken (or the Like)”

  1. Anonymous

    To get an accurate picture of net worth, you should include major assets like a home. But they aren’t high liquid (nobody is making a market in your home), so determining a value is iffy.

    There are a few sources of value estimates to use:
    1) a local real estate broker (but if you ask often they’ll try and convince you to sell; churning your home is not recommended)
    2) an estimation site like zillow (of unknown reliability; their estimate on my house in a major city increased more than 10% inexplicably during January 2008)
    3) tax assessors office (can be a very lagging statistic; here they always use the value as of January of the prior year – so January 2007 for 2008 tax bills).
    5) your insurance company’s estimate of replacement cost, plus the tax assessed value of the land.
    5) your own knowledge of improvements (but most improvements don’t return 100% at sale).

    I recommend using some weighted average of 2, 3, and 4 (and, if you are or are married to a real estate broker, #1), adding 90% of the cost of home improvements (not repairs), and then multiplying by 94% (to reflect a 6% sales commission). Not that I actually do that myself, but that is as reliable a method as I can see for doing it.

  2. Anonymous

    If I want a more rosy financial picture, I run a Quicken net worth report including home value and main mortgage. I stay conservative here, using the most recent tax-assessment value.

    If I want a more practical picture, I customize the report to exclude the home value and main mortgage, since that asset is not liquid and the mortgage liability is covered by the home’s value. I do not exclude the home equity line of credit here since I pay it down whenever I can, thus it is an active element in my routine cash flow.

    I don’t include vehicle value in either method. Because of their depreciation, and that I use them until they die anyway, I consider them a consumable.

  3. Anonymous

    I track the value of my home and other real estate in Quicken. I keep the values limited to the assessed value given by the tax assessor’s office. The assessed value is lower than the value or the value we would obtain if we sold the property.

  4. Anonymous

    I include both my house and my mortgage in net worth calculations in Excel. I update the value of my house whenever I make a home improvement and have chosen not to attempt to estimate the value of my house on the open market. With the latest bubble, I expect I’ve under estimated the real value of my house but it’s not actually an investable asset so I’m willing to take the paper-hit on my net worth.

  5. Anonymous

    I use MS Money 2004 and I have an asset account for my home so I can track my mortgage without the software telling me I have a negative net worth. However, I simply use the home’s appraised value from when I purchased it 2 years ago. I may change it in the future if I have evidence that the house would sell for significantly more or less than that price. I consider improvements to the house as expenses, although I’d feel differently about a $50K improvement. In my case, most of the equity I’ve built up in the house will just go into the next home I purchase, so the house doesn’t really mean much to my net worth because I’ll always need somewhere to live.

    I’m more concerned with paying off the mortgage to free up my income to increase my investable net worth. That, and the eventual downsizing of housing in retirement to cash out excess equity, are the only ways I see my home benefiting my net worth.

    If I were in your situation, I’d increase my house account by the value of the renovations (not the amount you spent). There’s a good estimator on Google “roi for remodeling” it’s the sub-link to the first result. The average major kitchen remodel costs about $54K and recovers 80% at sale. Good luck and enjoy your newly remodeled home.

  6. Anonymous

    I use MS Money 2008 and I keep track of my home value as well as my mortgage balance.

    I update my home value roughly annually — it’s obviously not an exact number, but if you’re honest and you have a sense of the market in your neighborhood you can probably get a pretty good idea of what your place is worth.

    I certainly would not suggest that you simply consider the sum that you put into improvements to have a dollar-for-dollar correspondence with an increase in the value of the home asset account.

  7. Anonymous

    Today’s post brings up one of my recurring minor headaches: what exactly is the value of this alleged asset, anyway?

    I track my assets & liabilities in Excel (for cross-platform convenience), and of course list what I imagine to be the full value of the two houses the bank, my son, & I own as assets and the amounts owing on mortgages are outstanding against the houses as liabilities.

    The county’s assessed valuation, for tax purposes, is significantly lower than the probable sale value of either house, although it’s a lot closer to reality for the house we recently purchased than for my house.

    The “new” (to us) house, however, was purchased for $15,000 under a real-estate assessor’s valuation and, since we bought it, has undergone significant restoration. Were all things equal, its value would be close to the original assessed value. However… Real estate values have dropped in the months since we bought the place, and so it’s hard to place a realistic value on the property as an asset in a believable net worth statement.

    Meanwhile, the house I’m living in rose in value by $118,000 during the ridiculous price run-up, and then over the past year has dropped (we think) about $60,000 or $70,000 off that high. It apparently is still worth more than it was before the Bubble, but — well, these days the value of a house seems to be determined not by what a professional or a homeowner thinks but by how anxious the seller is to unload it.

    It’s very hard to know how to value residential real estate in a way that gives you a realistic estimate of equity. Zillow and similar tools seem no more reliable than the opinion of anyone who’s keeping an eye on sale prices, for the reason above. If your neighbor needs to sell a house in something under six months, the price has to come way down, and that will depress your valuation.

    Do you have any thoughts on how to arrive at a reasonably valid estimate of a house’s value?

  8. Anonymous

    I put both the house and cars as assets in Quicken. And since I have no debt on them, NOT including them would be a big hit (and not really reflective of all I own.) Here’s how I do it:

    House — I initially put the home in Quicken at my cost (reflecting market value) less what it would cost me to sell the home (this is what I really have access to.) Then I raised it once a year through an “adjustment” category. This past year, I’ve been using the same adjustment category to take the value down.

    Cars — When I bought them, I put in the purchase price. Every year, I look at the Kelly Blue Book value one year in the future and deduct the appropriate depreciation each month (charged to “depreciation” expense) to reflect what I could get out of the cars if I had to sell them.

  9. Anonymous

    I track both my house and car as assets in Money. They, of course, are offset mostly by the loans outstanding against them. I use Kelly Blue Book online to update my car asset every few months and might adjust the house once a year.

    To me, the value of a home or car is investable past the balance of the loan. I mean, we sold one of our cars that was paid for this past year to pay for some roof repairs to the house. We haven’t bought another one to replace it. So, it was definitely an asset that had a real value to me.

    You could do the same with you house if you were to sell it and choose to rent. The net gain could be used for investment. They may not be liquid assets, but they are assets none the less. A

    long with my net worth, I’m also tracking our consumer debt. That is the main number we are trying to reduce. So, regardless of the other asset values, I still have goals to track. Our first goal is to get back to a positive net worth by the end of next year. Between 401(k) investments and debt payments, we should come pretty close.

  10. Anonymous

    I include my home as an asset in quicken, but I have chosen to exclude it’s value, along with my mortgage from my net worth calculations. I feel the same way about tracking net-investable-assets over assets in general so I do not consider my home when figuring out if our financial situation is improving or not. At the same time, I don’t think the associated liability should be counted against my net worth either since the liability (mortgage) is secured by the asset (house).

    I employ a similar tactic with my vehicles. The car we own free-and-clear is not listed as an asset while the vehicle with the car loan is listed as an asset to offset the car loan (liability) that I am tracking in quicken. I adjust the value of the vehicle down to match the balance of the car loan resulting in zero net-value for the vehicle. I feel that this is a fair and accurate way to handle liabilities that are secured by assets. (Note: There is a complicated reason why I don’t just exclude the car loan/car from my net worth calculations like I do my home value, but I’ll spare you the story. As a result, I’ve just given two ways of dealing with non-investable assets that have associated liabilities)

    I’m going through the same thoughts on home improvements that you are. We are saving a nest egg to pay for some home improvements in the next year and over that time, the money will “evaporate” from the balance sheet.

    Ultimately, you are reporting your net worth to yourself, so I don’t see the point of trying to “fool” yourself by making the chart keep going up. If your philosophy is to track net-investable-assets then home equity certainly would not qualify. When your balance sheet loses $50k, as long as you know that money went to home improvements, I would take the hit and keep moving. As long as you can account for the $50k, there is no problem. When you eventually sell, you’re net worth will get that $50k back, until then it is not an investable-asset.

  11. Anonymous

    I also track my home as an asset. I also have an associated mortgage.

    When I renovated my kitchen this summer, I adjusted the value of the home to the assessed value given when we refinanced. Then as I paid money out on the renovation I debited it from checking and credited it to the house. I won’t make any adjustment to the value again until we either refinance, get an appraisal for some other reason, or sell.

    (Note: I didn’t credit every trip to Home Depot – this was the big payments to the cabinet people, the countertops, floors, etc. I included the lights (we did ourselves) but not the paint. Basically the stuff that would outlast our ownership and clearly add to the value of the house in the eyes of a buyer.)

    I don’t think it’s possible to track the houses’ value on an ongoing basis the way you can with a monthly investment statement. Real estate is too iffy. I do think you can realistically update the value every couple of years and/or when you get the house assessed. If you aren’t sure, you can always have a realtor come in and suggest a listing price, then set the new value a bit lower than that. That’s free.

  12. Anonymous

    I track my home value as an asset in Quicken. I also track a very rough estimate of my vehicle(s) worth in Quicken as well. I then have the loans for each vehicle(s) and the house mortgage in Quicken as liabilities.

    I don’t like to not include the home value. I think the value I started with was the buying price (which was right in line with the appraised value), and then about once a year, I might bump it up a small amount, to account for home improvements that I’ve made.

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