Arm's-length Transaction Or Not

[mitrich2001]

The property is being sold without a listing or “for sale” sign. The selling agent told me he found the buyer through the @properties agent network, i.e. there was another agent who had a buyer. I think, it's a non-arm's length, since the property was not offered on an open market for a reasonable length of time; the lender insists on the opposite. What do you, ladies and gentlemen, think?

 

[Mr Rex]

If the buyer and seller were not related and had no other type of prior relationship, then its arms length. It may not meet the definition of a market transaction, but that is not the same thing.

 

[Michigan CG]

Arm's Length Transaction: A transaction between unrelated parties who are each acting in his or her own best interest.

Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).

 

[Michigan CG]

ME: Mr. Rex, would you like to sell your house to me?

REX: Sure, what are you offering?

ME: I was thinking $200,000.

REX: Eh, I was thinking more like $225,000.

ME: Throw in the John Deere mower, the dog and the barn cat and we have a deal.

REX: You can have the mower and the cat, not the dog.

ME: OK, it's a deal.

That is an arm's length transaction.

 

[mitrich2001]

Well, here's the definition from the “Fundamentals of Real Estate Appraisal 8th Edition” (page 388): “A transaction in which both buyer and seller act willingly and under no pressure, with knowledge of the present conditions and future potential of the property, and in which the property has been offered on the open market for a reasonable length of time and there are no unusual circumstances.”

I don’t know whether both buyer and seller act willingly and under no pressure, with knowledge of the present conditions and future potential of the property; but I know that the property has NOT been offered on the open market for a reasonable length of time: there was no MLS listing, no “for sale” sign, no advertising in the mass media – one agent said “I have a seller” and the other replied “I have a buyer”. Does that stand for “the property has been offered on the open market for a reasonable length of time”?

 

[Pilgrum]

Arms length. But not typical exposure to the market.

 

[Meandering]

, and in which the property has been offered on the open market for a reasonable length of time and there are no unusual circumstances.”

The property is being sold without a listing or “for sale” sign. The selling agent told me he found the buyer through the @properties agent network, i.e. there was another agent who had a buyer.

Why do you believe @properties agent network is any less of an open market than the MLS?
I have a property advertised on Craigs List, it's still advertised on the open market.

The property is being sold without a listing or “for sale” sign.
We have HOAs that do not allow for sale signs those properties are still exposed to the open market.

It's Arm's length, find out from the seller how long they had it advertised to get the days on the market.

There are lots of places for markets to advertise. Always remember your definition does not call out any specifics such as must be MLS or must have a sign, or must have a photo flier in the lunch room of the large neighborhood employers, or on the bulletin boards of the local grocery stores. All of these are market exposure to the open market and fit your definition.

.

 

[mitrich2001]

Why do you believe @properties agent network is any less of an open market than the MLS?
I have a property advertised on Craigs List, it's still advertised on the open market.

The property is being sold without a listing or “for sale” sign.
We have HOAs that do not allow for sale signs those properties are still exposed to the open market.

It's Arm's length, find out from the seller how long they had it advertised to get the days on the market.

There are lots of places for markets to advertise. Always remember your definition does not call out any specifics such as must be MLS or must have a sign, or must have a photo flier in the lunch room of the large neighborhood employers, or on the bulletin boards of the local grocery stores. All of these are market exposure to the open market and fit your definition.

.

The seller has NOT advertised in any way - no listing, no "for sale" sign, no ads, no craigslist/Zillow/redfin etc., there is no information about the subject even on the selling office's (@properties) web-site.

 

[Meandering]

The selling agent told me he found the buyer through the @properties agent network, i.e. there was another agent who had a buyer.

So your seller had an agent who did not market the property, but kept it as a pocket listing?

And did not market it at all?

but went on a network and found a buyer he convinced to buy it?

Really?

 

[bnmappraisal]

Arms Length.

Maybe the sales price isn't Market Value, but the sale is Arms Length. (OP - I used to ask myself the same question for a long time, BTW)