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Do Future Real Estate Commissions Count Against Net Worth?

Posted by Sean | Posted under Real Estate | September 7, 2008

I’ve seen different ideas on how to calculate net worth, but I don’t think I’ve seen any mention of future real estate commissions. Why not? In my mind, the moment we signed the papers, we created a material liability in the form of seller’s fees. We may not know the exact timing, but it is joined at the hip with the other real estate values. Definitely don’t want to get bogged down with too many details, but I think it was appropriately conservative to setup a 6% liability against the purchase price.*

* At least for our situation, i.e. we don’t intend to live here forever, we might not move into a house next time, depending on the city or country, etc.

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5 Comments so far
  1. Dawn September 8, 2008 9:33 am

    Good question! I have bought with a realtor and without. When it comes to selling, I definitely plan on using a realtor, and 6% is pretty standard. Here’s a question for you - I haven’t seem many people include their car on their statement. I realize that some people owe more than what the car is work and are “upside down” but in my case I have a very sell able, highly desired car (Honda SI) that came up as on a Kelly Blue Book for $13,000. Why don’t other people include their approximate car resale value?

  2. Tom September 9, 2008 1:45 pm

    I think this is completely true. Future does not indicate net worth in anything. You don’t and can’t expect what the value of something in the future might be no matter how certain you may be. You can only be 99% sure of the value at most.

  3. Sean September 10, 2008 6:21 am

    @Dawn

    Currently, I don’t include cars. We own them outright, but they seem immaterial. I’d have to revisit that when we get anything more valuable.

    @Tom

    I disagree. If you already include the estimated present value of real estate, I’d argue the real estate commissions have a known present value, too. I guess that’s what I’m trying to say here.

  4. MoneyBeagle September 10, 2008 10:39 am

    Great little post. I currently ‘write down’ the expected real estate commissions against the value of our home. I actually ‘write down’ a bit more than the 6% only because of all the other costs you’ll have to pay when it comes time to sell your home: taxes (always taxes), home warranty to the buyer, misc.

    The only way doing this wouldn’t apply is if you plan on selling the home yourself or if you never move. Otherwise, I think building this into your net worth gives the most accurate picture possible.

  5. Uncommonadvice September 13, 2008 2:20 am

    There is an easy way to get round this - never sell. Just make sure the property stays rented for ever, and remortgage to take equity out every couple of years.