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Zillow Says I’m $400,000 Wealthier! Why Net Worth Is Rubbish

Published: 09/21/2009 | Updated: 12/05/2020 by Financial Samurai 15 Comments

Primary Residence Zestimate
Primary Residence Zestimate

After all these years, Zillow still can’t get its property estimates right. Zillow is also a great reason why you’ve got to be careful calculating your net worth if you have property.

To prove my point regarding “Your Net Worth Is An Illusion” I took a look at Zillow’s latest zestimates of my primary residence and rental property. Apparently, in a span of 3 months, my primary residence gained a whopping $300,000!

I’m popping open a bottle of  Crystal, buying a rose gold Patek Philippe Calatrava at Tiffany’s, and ordering the Audi R8 on as we speak. Just kidding, especially since September is frugality month. Besides, Zillow isn’t writing me a check for $300,000!

The dollar sign shows the purchase price after a 4 month escrow that began in late 2004.  In other words, the purchase price was $250,000 below what the zestimate measured as fair value in the middle of winter.  

You’d think that after 10+ years of existence, Zillow’s price algorithms would be more refined. Perhaps the data is legit, but I’m not buying it. Since net worth calculations don’t include one’s primary residence, let’s strike this example and look at a rental property.



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Family Gets Award For Paying Off Debt & Jumps Right Back In!

Published: 09/19/2009 | Updated: 07/07/2020 by Financial Samurai 6 Comments

Paying off debt should be straight forward. Yet so many people fail to pay off their debts? If you go $106,000 into personal debt, and pay it off in 5 years, you apparently get the Professional Achievement and Counseling Excellence (PACE) 2009 Graduate Client of the Year Award. I was hoping for a longer award name, but what a great nugget to put on their resume!

The kicker? The Hildebrandt’s decided to dive back into debt with one year left on their pay back plan by buying a house! Furthermore, they took advantage of the $8,000 first-time home buyer tax credit. The article ends with sage advice from the Hildebrandt’s saying, “Get out of debt, it’s a choke-hold.”

We should be paying off debt

One of the greatest things about America is free speech. It’s never been paying off debt! Good or bad, we are a society that coddles fragile self-esteem and rewards people for situations they shouldn’t be in from the onset.

Although The Hildebrandt’s aren’t practicing what they preach, they’ve got their award and are living the American dream. Congrats guys! We can’t wait for your next award.

Meet The Hildebrandt’s and read about their great achievement.

Related Posts:

FS-DAIR: The Debt Pay Off And Investing Framework

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Why I Can’t Bank At Wells Fargo

Published: 09/12/2009 | Updated: 11/06/2018 by Financial Samurai 6 Comments

A Wells Fargo Senior VP, Cheronda Guyton moved into a foreclosed $12 million mansion with her family and hosted extravagant house parties.  Meanwhile, her job is to figure out how to profit from foreclosures (well done!), but she didn’t allow brokers to show the Wells Fargo-owned place because her family was squatting!

I knew there was something funny a couple years ago, when I was talking to one of their mortgage brokers and the rates he was quoting were 50-100bps higher than everyone else.  Bank of America got my business instead.  Too bad Ken Lewis was so empire-building driven and panic bought Merrill at the market open, instead of after the close.  What’s $25 billion more between between shareholders?

Given we live in bizarro world, don’t be surprised if Wells Fargo goes ahead and promotes her to lead up a different department.  After all, Wells Fargo does technically own the foreclosed home, and can do what they will.  Their $60,000/month vacation rental asking price might sound excessive, but not as excessive as Cheronda Guyton not letting anybody rent it out because she wanted to pump up the base herself!

Great to see our $25 billion in tax payer bailout money be put to good use.  Thanks for everything Cheronda.  Tell you what guys, since we are PR experts here at Financial Samurai, why don’t you Cheronda donate the $240,000 in lost rental income to the LA firefighter’s fund, and ask your employer to match it.  Here’s your article with further details.

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Less than 5% of the real estate deals shown gets through the Fundrise funnel

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Updated for 2019 and beyond.

Property Makes People Think Irrationally

Published: 09/03/2009 | Updated: 11/06/2018 by Financial Samurai 18 Comments

Over at a new found site called ” The Writer’s Coin,” the 28 year old personal finance writer questions whether he should buy this house if he only has 13% down. Mind you, he has been giving personal finance advice for a couple years now, and is even a guest poster on mega-site Wisebread, which Financial Samurai may one day contribute to. Honestly, I felt like I was watching one of those Holiday Inn commercials reading his post. A guy would provide some great advice and become a medical doctor because of his one night stay at the hotel chain. But what about the next night when he has to sleep at home?

WC’s question got me thinking. If someone who has been disciplined enough to write about money matters still can’t see the fallacy of buying a house with only 13% down, why are we so weak when it comes to housing? Do people just blindly fall in love with something and disregard every financial principal?  Doesn’t seem like WC has much more saved up than 13%, because who says “13% down” anyway? Why not 10%, 15%, or 20%?  Heck, back in the good old old days, people paid 100% down.

How did we come to this pitifully low downpayment standard in America? Probable explanation #1) It’s the Madoff Syndrome aka greed! “I want this, and I want it now!” and #2) The Nesting Syndrome.  There is a tendency for those in a long term relationship who want children to buy a place. I don’t even have to read WC’s about page to guess he’s planning on getting married or having kids. For the guy specifically, the itch seems to start at 30, if not sooner. The desire of owning our own castle and showing we’ve “arrived” is strong. 

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BusinessWeek: 10 Best Places To Own Property

Published: 08/28/2009 | Updated: 12/05/2020 by Financial Samurai 6 Comments

BusinessWeek comes out with a Top 10 list of best places to buy vs. rent. This is their formulation in their words:

“To create a fair match-up between owning and renting, we calculated ownership costs assuming a fixed 30-year loan for 100% of the purchase price with no down payment. If they had instead decided to factor in a 20% down payment, owning would have been the cheaper option for the top 10 metros on our list.”

The problem I have with this list is that I don’t see the words “Honolulu”, “Newport Beach,” “Malibu”, “San Francisco”, or “Paradise”! Everywhere one wants to live is expensive, and everywhere one doesn’t really prefer to live is cheap. Things are cheap for a reason, and real estate is no different.

Think about prime real estate sitting a top a triangle. The triangle’s base always gets wider as demand continues to grow.  Meanwhile there’s only one prime location.  Is it no wonder why Realtors always talk about “location, location, location”?  You can also think of your sub-prime location as an inverted triangle ready to topple over.  Only a very few want to buy, and the supply is overwhelming.

During this real estate correction, you’ve seen expensive areas such as San Francisco correct 15-20% from the peak, however, drive out 1 hour east and places such as Antioch and Pittsburgh have gotten crushed by 40-60%.  If you’re an investor, focus on places where you’d actually see yourself willing to live in.  After all, if you wouldn’t want to live in your property, why would someone else?

A similar purchasing analogy can be made with cars. You may think that someone buying a limited production Lamborghini Gallardo Spyder for $210,000 is foolish with his money. But, after one year later, he’ll sell that Lambo for more, or at the least recoup more than if he had bought a brand new Ford Expedition for $48,000.  Obviously this example is extreme here, given most don’t have $200K to splurge on a car, but you get my point.

Things are cheap for a reason. Only if you have the financial means, and are already living in one of these 10 cities should you consider buying.  Otherwise, just focus on buying or renting in that tropical paradise in the best location possible.

Read more to see what paradise cities lie in BusinessWeek’s Top 10 list!



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