Arms Length Transaction

[Zsa Zsa]

So sorry for this ridiculous and embarrassing question...I'm just having a brain freeze! I am finishing up a report; purchase between the owner (an LLC) and the current tenants. Arms length or Non arms length. Again, I'm sorry, I do know this!

 

[shrubberyvaluation]

So sorry for this ridiculous and embarrassing question...I'm just having a brain freeze! I am finishing up a report; purchase between the owner (an LLC) and the current tenants. Arms length or Non arms length. Again, I'm sorry, I do know this!

Arms Length

 

[glenn walker]

So sorry for this ridiculous and embarrassing question...I'm just having a brain freeze! I am finishing up a report; purchase between the owner (an LLC) and the current tenants. Arms length or Non arms length. Again, I'm sorry, I do know this!

Arms length --we sell properties all the time to tenants but we are not blood related to them and normally maybe a little better deal because we dont have to clean it up or update it after they move out.

 

[Mark K]

Not arms-length; they have an existing business relationship.

 

[shrubberyvaluation]

Not arms-length; they have an existing business relationship.

People in a business relationship tend to act in their self-interest, how would it not be arms-length?

 

[Mark K]

People in a business relationship tend to act in their self-interest, how would it not be arms-length?

Because they have an existing business relationship. The sale may or may not be at market value but, by definition, it is not arms-length.

 

[Elliott]

Was there any other exposure to the market?

 

[shrubberyvaluation]

Because they have an existing business relationship. The sale may or may not be at market value but, by definition, it is not arms-length.

By what definition? It would be non arms length if they had more than a business relationship.

 

[TerryRohrer]

This is one of many issues that FNMA could clarify if it mattered. Per FNMA:

"Non-arm's length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property."

A definition of relationship suggests that:

'the way in which two or more people or groups regard and behave toward each other.
"the landlord–tenant relationship" '

 

[Mark K]

From various websites:

"However, it is a thumb rule, that parties who are having business transaction and have pre-existing relationships, either personal or professional, the transaction is assumed to be a non-arms length transaction."

"A non-arm's length transaction, also known as an arm-in-arm transaction, refers to a business deal in which buyers and sellers have an identity of interest; in short, buyers and sellers have an existing relationship, whether business-related or personal."

"An arm's length transaction is one that takes place as if the two parties involved had no pre-existing relationship."

"An arm's-lengths transaction is any deal, contract or agreement between parties who have no significant relationship with each other, be it familial, friendly or business related."