Low appraisals derail housing deals in Twin Cities metro

10:46 PM, Nov 12, 2012   |    comments
  • Share
  • Print
  • - A A A +

MINNEAPOLIS - There are all sorts of hurdles home buyers and sellers must face, but there is one in particular that's popping up more and more -- low appraisals.

It's a hurdle that the National Association of Realtors says is hampering the nation's housing recovery.

Just ask Jeff Jay of Richfield, who is planning a move to Chicago for his husband's job.

"It will be hard. We really like it here," says Jay.

Harder yet is hearing what his home will sell for.

Jeff and his husband, who married in Iowa, purchased the home four years ago for $254,000.

Currently listed for $240,000, Jeff would still take a loss, but one he could handle.

Then the appraisal came in at $200,000.

The home's value set $40,000 below what even his realtor thinks he can get for it.

"It's scary. It's not right," says Jay. "I'm certainly going to get a second opinion."

Real estate agents across the Twin Cities are telling KARE 11 of similar problems.

"We've been seeing it quite a bit," says real estate agent Steve Fiorella, who says he's run into appraisal problems on a dozen homes so far this year, or about 20 percent of his transactions.

"Clearly the free market system has said this home is worth x dollars. The buyer is willing to pay that," says Fiorella. "But then the appraisers, the person with the clip board, says 'No.'"

Zoe Liston is that person with a clip board.

"You've got to blame it on somebody," says Liston.

She says post-housing crisis, her hands are tied by banks like never before.

"Years ago it used to be every time I did an appraisal, it was done, gone, and I never heard back from them. Now I hear back from them on a lot of files," says Liston.

Facing new regulations, banks are reigning in and more risk-averse than ever.

For Liston, a misappraisal can have serious consequences.

"We have federal guidelines we have to follow," says Liston. "If we don't follow them, we could lose our licenses. We could end up sued. We could end up in prison."

Yes, even prison if blatant fraud is involved.

"I'm not going to jail for you. I don't care how much you think that house is worth or how nice that bathroom is, I'm not going to jail for you."

The biggest thing keeping appraisals low says Liston, is she must go off of comparable sales, or comps, from the last 6 months. In an improving market like we're seeing, looking at past sales can present a problem.

"We're still looking to the past. So if prices are coming up, we're looking backwards," says Liston.

The Minneapolis Area Association of Realtors is concerned about the effect this is having on prices.

"The rules that the appraisers have right now are not giving us any room to respect that market value," says Emily Green, the president-elect of the Minnesota Association of Realtors. "I do see it as our biggest problem right now."

(Copyright 2012 by KARE. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Most Watched Videos