Arms Length Sale Question

[residentialguy]

it is a distressed sale, but an arm's length transaction. buyer & seller do not know each other and each is looking for their own best interest. a bidding action is like having 5 buyer's in a bidding war.
didn't we see that the last couple of years. the auction is acting as the agent, just like the realtor, for whomever.

However there is duress involved with the seller. It is distressed TERMS of sale, not just physical condition. The bank has to sell. They did not want it, they were forced to take it, they can't rent it, they can't profit from it at the sale. Every day the property sucks from them. It is absolutely not an arms length sale.

 

[Mark K]

As appraisers, we don't get to make our own definitions of many terms. Arm's length sale is one of those.

There are a lot of different definitions; we don't need to make up our own. The question is which one everyone should use. Some don't include a 'duress' situation, simply a relationship, others include duress.

The Ohio Supreme Court used a definition that includes duress. It seems that, for appraisers in Ohio at least, their definition should follow the Court's lead.

"The Court came to this conclusion by applying the logic that a foreclosure sale is motivated by the desire to satisfy one or more creditors. Therefore, this motivation could be considered a form of duress, which negates the independence expected from the parties to an arm’s length transaction."

 

[Tom D]

The term “arm’s length transaction” refers to transactions that are conducted between parties who are acting independently from one another and are not associated with one another outside of the transaction in question.
a distressed sale can still be an arm's length transaction.. the court's motivation comment would mean a sheriff sale, tax sale, divorce sale, bankruptcy sale, nursing home sale, bad neighbor sale, were motivations creating a duress, negating independence. you can say whatever you like.