Arms Length Transaaction. What Does This Mean?

[Lonny Hogan]

I'm needing an offical definition for the term Arms length transaction. I've got a purchase on a home, I'm appraising right now in which this is in question. I hoping not to attract opinions but actual verifiable text book definitions of the term, if such a thing exists. Any help??

 

[Ghost Rider]

"ARM'S LENGTH" TRANSACTION:
A colloquial description of a transaction where none of the parties are related to each other or have common interests -- they have each other at "arm's length". An arms-length transaction is generally at fair market value; in a "non-arm's-length" transaction, the relationship between the parties may cause one or the other to accept less than they are entitled or pay more than fair market value.

 

[DB]

Also extends to the purchase or sale of adjoining land parcels or other factors that may cause a party to pay more or less than is considered reasonable for the market ......

 

[Scott Fleming]

"A transaction freely arrived at in the open market, unaffected by abnormal pressure or by the absence of normal competitive negotiation as might be true in the case of a transaction between related parties."

Real Estate Appraisal Terminology

This is from the 1975 edition (yeah, I'm getting old) and may have been revised.

 

[Scott Fleming]

or cause a seller to sell for less, such as a foreclosure.

 

[Lonny Hogan]

Thank you.

 

[Alan Simmons]

Check with your state. Most (if not all) states have legal definitions for what can be considered an arm’s length transaction or not. In some states a sale between siblings can legally be considered arm’s length.

However I would prominently disclose any relationship in the report no matter what the legal definition.

 

[Kate]

Buy the book,

"The Language of Real Estate Appraisal" by Jeffrey D. Fisher, Robert S. Martin, & Paige Mosbaugh.

Very useful.

 

[Proactive]

I hoping not to attract opinions but actual verifiable text book definitions of the term, if such a thing exists. Any help?? I hoping not to attract opinions but actual verifiable text book definitions of the term, if such a thing exists. Any help??

From the "Dictionary of Real Estate Appraisal", Third Edition (1993):
Arm's length transaction. A transaction between unrelated parties under no duress.

The same definition is used in "The Appraisal of Real Estate", Twelfth Edition (2001). Both books are available through the Appraisal Institute, and make great holiday gifts! :lol: