Arms Length Transaction

[Artemis Fowl]

Non-arms length is not automatically non-market indicative.

 

[shrubberyvaluation]

From various websites:

"However, it is a thumb rule, that parties who are having business transaction and have pre-existing relationships, either personal or professional, the transaction is assumed to be a non-arms length transaction."

"A non-arm's length transaction, also known as an arm-in-arm transaction, refers to a business deal in which buyers and sellers have an identity of interest; in short, buyers and sellers have an existing relationship, whether business-related or personal."

"An arm's length transaction is one that takes place as if the two parties involved had no pre-existing relationship."

"An arm's-lengths transaction is any deal, contract or agreement between parties who have no significant relationship with each other, be it familial, friendly or business related."

Thank you.

 

[Ariba]

Arms length --we sell properties all the time to tenants but we are not blood related to them and normally maybe a little better deal because we dont have to clean it up or update it after they move out.

Just because you do it all the time does not make it right. Also, what has blood to do with determining if it is a non-arms-length or arms-lenght transaction?

 

[shrubberyvaluation]

Just because you do it all the time does not make it right. Also, what has blood to do with determining if it is a non-arms-length or arms-lenght transaction?

Blood = relative

 

[Ariba]

Blood = relative

You are smart. So by your definition of a relative if there is no blood involved they are not relatives. Stepmothers, adopted kids, etc. no blood involved is no relative.

A non-arm's length transaction is a deal with someone you have a relationship with, whether that's professional or personal. This can include family members, friends, business partners, etc. This type of relationship between buyers and sellers is known as an identity of interest.

 

[ShortSeller]

Have a similar situation as well. Looking at an FHA order, owner selling the home to the tenants. I also concluded it was a non arms length transaction, but should I only use FHA financed/ or non-arms length transactions as comparables?

 

[Terrel L. Shields]

I also concluded it was a non arms length transaction, but should I only use FHA financed/ or non-arms length transactions as comparables?

FHA financing is not "not arm's length" per se. Just appraise it for what it is worth and if the comps are not AL then mention them and why you gave them no weight and go to the next comp.

 

[shrubberyvaluation]

Have a similar situation as well. Looking at an FHA order, owner selling the home to the tenants. I also concluded it was a non arms length transaction, but should I only use FHA financed/ or non-arms length transactions as comparables?

Why would you use non-armslength transactions for market value?

 

[ShortSeller]

FHA financing is not "not arm's length" per se. Just appraise it for what it is worth and if the comps are not AL then mention them and why you gave them no weight and go to the next comp.

I thought it was not arms length because it was not listed on the market, it was between the current tenants and the owner. btw, AL?

Why would you use non-armslength transactions for market value?

I agree, this was my initial hunch. Only thing I noticed was that the sale price seemed "reasonable" for what it was. Wouldn't a non arms length sale price be more compromised in one way or another compared to a traditional arms length sale?

 

[Dublin ohio]

I thought it was not arms length because it was not listed on the market, it was between the current tenants and the owner. btw, AL?

I agree, this was my initial hunch. Only thing I noticed was that the sale price seemed "reasonable" for what it was. Wouldn't a non arms length sale price be more compromised in one way or another compared to a traditional arms length sale?

You are not appraising the sale. You are appraising the real estate. The sale conditions could be a reason for a difference (if any) in your omv and said sale price. The sale price is what it is. Your value opinion is what it is