Q: I understand interest rates are low and I have heard it is a good time to refinance, but I’m having a hard time finding a bank to do a refi on the home I bought in 2007. Why?

A: If you purchased in 2007, you may have a potential appraisal problem due to the increasing number of short sales and forclosures that are now being included in appraisals.

According to the National Association of Realtors, approximately 38 percent of existing home sales in 2009 were distressed sales, and 12 percent were short sales. Foreclosure sales accounted for two out of three distressed sales, and the rest were short sales.

Stan Reinford from Bank of America Home Loans had this to say:

“I have received many calls from clients, agents, etc. regarding appraisal issues that are still occurring. There was a time in the past that short sales and foreclosures were not included in the appraisal. They were thrown out or ignored due to the fact that they were uncommon. Not the case now. They are common. The buyer is certainly benefiting. However, the seller and the client who wants to refinance are losing.”

For example, Reinford helped several clients purchase homes in the same neighborhood a few years ago. The average sales price was $220,000 to $240,000. He received a call from a client in 2009 to discuss the possibilities to refinance. The loan was an FHA, which allows for a streamline refi — no appraisal, no employment and no closing costs. BUT they chose not to refinance at the time.

Last week they contacted Reinford again to refi now. Unfortunately, he could not help them. The streamline refi has now been discontinued. They must now obtain an appraisal and a complete application.

“I explained to this client in 2009 that if they decided to refi in 2010 that this would happen,” said Reinford. “I personally did a mortgage for a buyer in this neighborhood who closed at $185,000 last week. There were several recent sales in the low $190[000]s. This is the new comp value for this neighborhood, so be careful.”

Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.