Arm's-length transaction?

[apt20]

A man and wife own a house. They get divorced, the man keeps the house after divorce. Two years later, man puts house for sale. Listed on the MLS approximatley 38 days before ex-wife enters into contract to buy property. The LP/SP ratio appears to be in line with everything else.

Per the Dictionary of Real Estate Appraisal, Third Addition the definition of arm's-length transaction is "A transaction between unrelated parties under no duress."

In your opinion is this an arm's length transaction? Everyone in the office agree that it is, but looking for outside opinions? This is a UAD report BTW.

Thanks for the input!

 

[CANative]

I don't think I'd characterize that as an arms length transaction.

 

[HF Mudd]

I've never met an ex-wife who didn't put her ex-hubby under some kind of duress...

 

[Terrel L. Shields]

Good question. Without knowing the actual relationship of the couple, I would not use it. Here is why. When an ex of mine moved to Tulsa, a former husband "sold" her his house in lieu of child support. To avoid capital gains he had to show the value.

That's probably not your situation, but in another divorce, I know the woman got possession of the house but court ordered to take or pay half the value. She was allowed to live there for 1 year before making the decision.

There are so many such entwining cases, I would query the Realtor extensively about what he knows. I would not simply use MLS and public data as a "source" for the terms of sale.

 

[apt20]

Sorry, i was typing on my phone and wasn't that clear earlier. This is our subject property. Under the contract analysis section, it ask for type of transaction.

Whether it matters or not, from everything we were able to gather from the ex husband and ex wife. Everything was amicable, kids are in their 20s and 30s, she didn't want it at the time and now he is ready to move on and head to Florida for the winter.

He listed it with a realtor and was on the MLS for more than a month, to me everything is telling me arms-length. Granted my experience pales in comparison, hence the reason I asked. Three of us in the office are thinking arms-length, the fourth was gone today.

 

[J Grant]

JMO...I would call it non arms length, but disclose that it was on MLS. If your value opinion is equivalent to contract price, that's fine, still does not make it an AL sale. Is it coincidence that of all the houses out there, this woman bought her ex husband's house? I don't think so.

He might have listed it on MLS for a number of reasons, but planned all long with her that she would buy it. Either party might be paying each other back as part of down payment, forgiving a debt, or forgiving future child support etc by agreeing to sell the property to former spouse. As Terrel showed above, we just don't know, nor are these people under any obligation to share personal details with us.

It's not a big deal since it's your subject..., just say due to parties' relationship as ex husband and ex wife your opinion is that it is not arms length, that subject was on MLS for a month, then go forward and develop the market value opinion.

 

[sputnam]

The sale may be at market price. I wouldn't worry much about calling it arm's length or non-arm's length....just explain what the situation is.

 

[Restrain]

Exposed at a reasonable price for the market, on the market for a period of time available to all potential buyers, offer is at market. No relation to the seller. Arms-length per the definition of an arms-length sale. Don't over-think things.

 

[apt20]

Thanks for the input! I appreciate the help!

 

[Peter LeQuire]

Exposed at a reasonable price for the market, on the market for a period of time available to all potential buyers, offer is at market. No relation to the seller. Arms-length per the definition of an arms-length sale. Don't over-think things.

This is reasonable.

Other than "arm's-length" implies - IMO - that the relationship beween buyer and seller results in some favorable consideration that results in the price being less than one that is "typically" motivated. It could be argued that the length of the arm between formerly married persons may well be longer than that of an arm between persons whose only common interest is the property being sold/bought.