How can you find out what your home is worth? If you're looking to refinance your mortgage, it's a critical piece of information, particularly if you're not sure where you stand in terms of equity in the property.

It can be a difficult question to answer, particularly given the slide in property values that have left many with little or no equity in their homes or even "underwater" on their mortgage - owing more than the property is worth. In such cases, it can be difficult or impossible to refinance a mortgage, even if you go through a low-equity refinance program like the federal Home Affordable Refinance Program (HARP).

You could just go ahead and pay several hundred dollars for a professional appraisal, which would be the most reliable and accurate way. However, you probably want to know if it's going to be worth your while to try to refinance before you get started spending money, either on an appraisal or application fees.

Fortunately, there are a ton of online tools that perform free home appraisals just by entering the address of the property in question. Unfortunately, the results they provide can vary widely - an understatement if ever there was one - and it can be a challenge to figure out which ones are closest to the mark.

Mixed neighborhoods more difficult to appraise

For example, entering the address of one single-family home near Ann Arbor, Mich. in 10 of the most popular online appraisal tools - from such companies as Zillow, RealtyTrac, Chase and Zip Realty, among others - produced estimates ranging from a low of $85,000 to a high of $286,000 - all for the same property. In some cases, a single appraisal tool would offer a range of possible values - which were as broad as $95,000-$187,000 for the same property.

To be sure, the property in question is in an outlying area, surrounded by homes of a mix of different sizes, styles, ages, amenities and lot sizes, which make it difficult for online tools to arrive at an accurate appraisal (they make it difficult for human appraisers as well - which is one reason "unique" homes can be challenging to refinance or to obtain mortgage funding for a purchase).

The online tools work best when assessing properties in neighborhoods where the majority of homes were built around the same time, in similar styles and costs - such as a subdivision, or an older neighborhood in a city or town.It's even better if there have been a good number of home sales in the area to enable the system to calculate comparable values, although foreclosure sales can skew the results downward.

Which estimate is correct?

But even in "consistent" neighborhoods, the results can easily vary by 10 percent or more - more than $20,000 on a $200,000 home. You can try running the same address through 6-10 appraisal tools and seeing if they tend to converge on a particular value, but even that may not be reliable, particular for unique home where no particular value range stands out.

What many appraisal tools will do, however, is provide you with a list of comparable properties that have recently sold in your neighborhood or enable you to locate them on your own. This is handy, because you can look at the homes that have sold in your area and see which are most similar to your own. This can help you identify which of the appraisal tool estimates is likely to be the most accurate for your property.

Of course, you're still going to have to pay for a professional appraisal if you're going to go ahead and refinance (unless you can take advantage of a streamlined refinance such as is available on FHA or VA loans). And your own estimate may not match up with what the professional appraiser decides. But at the very least, doing your own appraisal with the help of online tools can help you decide if a refinance is something you want to pursue further, before you start spending any money on it.

Published on July 9, 2011