Arm's length transaction

[J Grant]

Go get a dictionary of real estate appraising and read the definition of arm's length. A transaction can be arm's length and sell below market value or above market value. And we wonder why...........!

You are a real piece of work. YOU THINK I DON'T KNOW THAT A TRANSACTION CAN BE ARMS LENGTH AND SELL FOR BELOW MARKET OR ABOVE?

Who are you to assume what I know, or don't know. You hawk dive into a post, extract a sentence, and asume it applies to all appraisal knowledge, or everything a poster does in their work practice.

I never see any appraisal content in your posts, but do see a lot of hounding other posters. You never, or rarely put your own appraisal opinions on the forum, you just jump into posts and take a statement out of context and then tell that poster to buy a real estate book. That must be very taxing.

 

[J Grant]

My comments relate to this iffy sale that may or may not be arms length, and to Terrel's comments about marketing time. Marketing time, if lack of it impacted an arms length relationship , is reflected in price.

Your own original content contribution to the thread is, as usual, minmal, mostly putting down other poster's opinions.

 

[CANative]

J... There is no controversy. "Arms length" has a simple mechanical definition and the OPs transaction meets the definition.

 

[J Grant]

I said in my first post, that it is most likely an arms length transaction, but, that landlord tenant can be a grey area between the two, and the appraiser needs to decide. Arms length transaction does not have a "mechanical " definition. (what definition are you using?

There are a few variant definitions in appraisal sources or education courses for arms length. All the definitions state that an arms length sale must be from parties that are unrelated, however, related does not necessarily mean blood relations, it can mean any relationship between buyer and seller that would impact sales terms or price to a level that is no longer market value. A few examples seen in defintions to clarify related parties, are a corporate sale to a stockholder, for example.

Can a landlord and tenant have a relationship that imacts whether or not this is an arms length transaction? Sure they can. A long time tenant who the landlord personally likes enough to give a discounted price to , or the tenant has done favors and improved the property over the years, or an arrangement between the two where the tenant pays a portion in rent over the years to buy down the purchase price .

Marketing time, or market exposure is also included in a number of arms length vs non arms length definitins, one of the facts of non arms length is that the relationship of the parties precludes the subject from having typical market exposure.

A landlord tenant relationship, where the tenant occupancy prevented landlord from showing the home on open market, would be an example.

 

[CANative]

From AI's Dictionary of Real Estate Appraisal:

Arms-length transaction
A transaction between unrelated parties under no duress.

What you're describing are conditions of sale which may require transactional adjustments when this transaction is being consider for purposes of comparison. These conditions of sale have no relationship to the appraisers opinion of market value as of the date of value.

however, related does not necessarily mean blood relations, it can mean any relationship between buyer and seller that would impact sales terms or price to a level that is no longer market value.

You're adding the potential impact to the definition.

 

[residentialguy]

I said in my first post, that it is most likely an arms length transaction, but, that landlord tenant can be a grey area between the two, and the appraiser needs to decide. Arms length transaction does not have a "mechanical " definition. (what definition are you using?

There are a few variant definitions in appraisal sources or education courses for arms length. All the definitions state that an arms length sale must be from parties that are unrelated, however, related does not necessarily mean blood relations, it can mean any relationship between buyer and seller that would impact sales terms or price to a level that is no longer market value. A few examples seen in defintions to clarify related parties, are a corporate sale to a stockholder, for example.

Can a landlord and tenant have a relationship that imacts whether or not this is an arms length transaction? Sure they can. A long time tenant who the landlord personally likes enough to give a discounted price to , or the tenant has done favors and improved the property over the years, or an arrangement between the two where the tenant pays a portion in rent over the years to buy down the purchase price .

Marketing time, or market exposure is also included in a number of arms length vs non arms length definitins, one of the facts of non arms length is that the relationship of the parties precludes the subject from having typical market exposure.

A landlord tenant relationship, where the tenant occupancy prevented landlord from showing the home on open market, would be an example.

I agree. Motivation is a factor, as stated in the first post by Walter. And Market Exposure? There was none! If we are to find MV for the subject, I would hope that your adjusted price of the comps reflect that value...otherwise you are not going to have market value, you have a deflated value of a tenant landlord sale that God only knows went on between that relationship.

Arms Length? Are we talking about the arms of Mr. Fantastic (Reed Richards) in the Fantastic Four?

 

[J Grant]

From AI's Dictionary of Real Estate Appraisal:

Arms-length transaction
A transaction between unrelated parties under no duress.

This is just one definition, there are others. It defines what is arms length, it does not define what is not arms length, (non arms length is often defined as a relationship between parties such as that impacts price or terms ( other definitions also include market exposure)

What you're describing are conditions of sale which may require transactional adjustments when this transaction is being consider for purposes of comparison.

Exactly what I said in my post! After the OP determines whether or not this is arms length, they may need to adjust this sale for terms, or weight it less.

These conditions of sale have no relationship to the appraisers opinion of market value as of the date of value.

I never commented on the appraiser's opinion of MV in my post.

You're adding the potential impact to the definition.

Not adding, going into more depth about facets to consider when there is a questionable call to be made, such as whether or not a landlord tenant relationship was such that it could impact arms length transaction status.

 

[CANative]

Exactly what I said in my post! After the OP determines whether or not this is arms length, they may need to adjust this sale for terms, or weight it less.

You do realize that the transaction being discussed is the subject of the appraisal being discussed?

 

[J Grant]

You do realize that the transaction being discussed is the subject of the appraisal being discussed?

If that is so, same standards appply, re when analyzing sales contract, one would discuss if it were typical or not, and the terms representative of other arms length market sales or not .

The OP was asking whether or not to describe it as arms length, so comments apply to determining an arms length transaction or not.

 

[Pittsburgh Pete]

You are a real piece of work. YOU THINK I DON'T KNOW THAT A TRANSACTION CAN BE ARMS LENGTH AND SELL FOR BELOW MARKET OR ABOVE?

Who are you to assume what I know, or don't know. You hawk dive into a post, extract a sentence, and asume it applies to all appraisal knowledge, or everything a poster does in their work practice.

I never see any appraisal content in your posts, but do see a lot of hounding other posters. You never, or rarely put your own appraisal opinions on the forum, you just jump into posts and take a statement out of context and then tell that poster to buy a real estate book. That must be very taxing.

It's hard to tell what you know and what you don't know. I do know that in this particular instance you are dead wrong!