People naturally want to save money where they can, and those wanting to sell or refinance their homes are no exception. Perhaps the most important question anyone thinking about doing these things can ask is how much the home is worth on the market. The value of the property is obviously critical to selling or buying, and will be a primary factor in obtaining a loan. An appraisal can answer this question, but that service isn't cheap. A typical home appraisal fee will run anywhere from $250 to $400 depending on where the property is and what it contains. Naturally, many people seek an alternative to this fee and a search of the internet will reveal a lot of companies and web sites that offer a free or relatively inexpensive solution.

Many web sites advertise "free" appraisals. These are typically web sites that ask a home owner to provide a property address and personal contact information. These sites are usually what are known as "lead" generators for real estate brokers. After the home owner submits the information online, they are later contacted by a real estate agent who provides (or offers to provide) a "competitive market analysis" of the home, based on recent sales and listings of neighborhood properties. But the real estate broker providing this information is going to want to meet with you and try to convince you to list your property for sale with them. In some instances, the owner may be contacted by several agents. These types of valuations are generally quite good, but no agent understandably wants to provide this service for free and definitely not to owners who are not interested in selling. Like anyone else, brokers much prefer not to work for free.

Another possibility is inexpensive electronic appraisals, known in the mortgage industry as "AVMs" or Automated Valuation Models. These are computer generated value ranges based on various techniques, such as comparing a sample of actual recent sales to tax assessor valuations to develop a ratio, or a statistical model using actual sales. The methods vary by AVM. The cost for these products ranges from about $20 to $40. These are often used by mortgage companies, but a few consumer products are available to the general public.

We have tested two popular AVM products and found them wanting. In one instance, a list of recent comparable sales was purchased from a consumer AVM site and compared to actual sales from the local MLS. Out of 12 sales provided by the AVM, not one of them matched MLS records for the same properties, and some of the selling prices shown in the AVM list were off target by as much as 100%. In another instance, a different AVM produced a range of value from $216,000 to $489,000 for a home, which is hardly a useful or informative range. The secondary mortgage market has taken notice of inconsistencies like this and mortgages based solely on AVM valuations have been subject to considerable discounting.

While free to cheap value solutions may serve some purposes, it is still a matter that you get what you pay for. A poor appraisal can end up costing someone many thousands of dollars. CMAs and AVMs where no one has actually inspected the property inside and out run the risk of being inaccurate for obvious reasons. If you live in a cookie-cutter neighborhood of very similar homes, mostly built by the same builder, these low-to-no cost products can be a worthwhile solution to your value problem. However, most homes are not exactly alike and feature different levels of condition or decorative appeal. It takes professional judgement and experience to provide a reliable and reasonable estimate of value. Most buyers and sellers have found that the fees charged by professional appraisers are well worth the money.