![]() ![]() Simple examples of a non-arm’s length transaction are buying a home from someone you have a relationship with (like a family member or a friend). A property that sells for less than market value may occur because it is under duress, such as REO, but it is not between related parties. Grandma can sell me her home at market value, under no duress, and it is not arms length but can be at market value. In the new FHA/HUD Handbook the definition of arm’s length transaction is, “ An Arm’s Length Transaction refers to a transaction between unrelated parties and meets the requirements of Market Value.” This is where the lines get blurred. The common definitions of market value usually set out the criteria for an arm’s length sale in detail (1).” On the page prior to this definition in this text, it reads, “Sales that are not arm’s length market transactions (in accordance with the definition of market value used in the appraisal) should be identified and rarely, if ever, used (1).” The Appraisal of Real Estate, 13 th Edition, published by the Appraisal Institute, states that an arm’s length transaction is “a transaction between unrelated parties under no duress. Everyone has an opinion and many believe their opinion is the correct one. While doing research for this article, it evoked a lot of emotion from my peers. ![]() What is an arm’s length transaction? The question seems simple enough, right? Just mentioning it on an appraiser blog creates a flurry of debate over what exactly is an arm’s length transaction. ![]()
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