Online tools for estimating real estate values like Zillow’s Zestimate, Trulia and realtor.com can be useful for determining your home’s current value. The biggest problem with these estimates is that they can vary wildly between each other and may not even be close to the home’s actual value. I can tell you that for my house, the Zestimate is much higher than my home’s value on Trulia and Realtor.com. After first learning this, I decided to only use the purchase price for our house when calculating the assets in our net worth. When given the choice between overestimating my asset numbers or underestimating them, I pick underestimation every time. I don’t want to ever have too rosey of an opinion of my financial situation for fear that this will cause me to save less or take finance less seriously.
However, since all of these sites agree on the fact that the home has appreciated in value, it made me reconsider. I want my net worth estimate to be conservative but I also want it to be as close to accurate as possible. Since the bulk of our worth is tied up in the house and our area has seen significant appreciation, the increase in value is probably material, which means it should be included.
The compromise:
I want a realistic yet conservative estimate of the current value, so I decided to average the purchase price and the three online estimates. Including our original purchase price in the calculation ensures that the online estimates are brought back down to earth. Taking an average of the sites alone was an option I considered. However, I didn’t want to completely rely on their unknown methodologies and I wanted to ensure that the final figure stays on the conservative side.