Non Arm Length Sale?

[FMV]

Hey AF-
Completing a standard URAR assignment.. the seller is the buyers X-Father-in-law.. would this be considered a Non-Arm’s Length? (I guess they had a great relationship!!.. lol)
Trying to wrap my head around this one & attempted to Google & look up Fannie Mae guidelines but don’t feel I can get a straight answer..

Any thoughts?

 

[glenn walker]

Not necessarily unless the contract price is substantially below what other properties are selling for ?

 

[Pittsburgh Pete]

Would say it's arm's length. Whether it is selling for market value is another question entirely (and always is).

 

[Addie]

Not necessarily unless the contract price is substantially below what other properties are selling for ?

What's price(MV) have to do with Arms-Length?

To OP, I'd say arms-length, cite your source in the report and explain to the reader/client why you went that way. All bases covered. If a reviewer ever came back and said non-arms length, #2, what is their source? You told yours, #2 it's your opinion on a possible grey area (I don't think grey but...)

 

[residentialguy]

It's definitely a non arm's length, simply because of the close relationship. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. That doesn't mean that it affected the price. Your opinion of MV will reveal that.

@Addie
To answer the question what does price have to do with non arms length? It often affects the price or the conditions of sale of the purchase.

Arm's Length Transactions and Real Estate
Arm's length transactions help determine the fair market value of a piece of property. To properly set fair market value, the price for the property must be obtained through a potential buyer and seller operating through an arm's length transaction. Otherwise, the agreed-upon price is likely to differ from the actual fair market value of the property.

https://www.investopedia.com/terms/a/armslength.asp#ixzz5ROgnPaBs

 

[Addie]

It's definitely a non arm's length, simply because of the close relationship. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. That doesn't mean that it affected the price. Your opinion of MV will reveal that.

@Addie
To answer the question what does price have to do with non arms length? It often affects the price or the conditions of sale of the purchase.

Arm's Length Transactions and Real Estate
Arm's length transactions help determine the fair market value of a piece of property. To properly set fair market value, the price for the property must be obtained through a potential buyer and seller operating through an arm's length transaction. Otherwise, the agreed-upon price is likely to differ from the actual fair market value of the property.

https://www.investopedia.com/terms/a/armslength.asp#ixzz5ROgnPaBs

Was in reply to Glenn. Where he said depends on the price. So you need to see the price 1st then decide.

Reality, they aren't even related in the least. Correlated, sure. Related no.

 

[residentialguy]

Was in reply to Glenn. Where he said depends on the price. So you need to see the price 1st then decide.

Reality, they aren't even related in the least.

Yes & no. The price will be an indicator, but not a determiner. A variance in price is the result.

 

[Tumbuktu]

Source: Basic Appraisal Procedures (AI Course)

 

[andrew81]

A transaction between unrelated parties who are each acting in his or her own best interest.

UAD wants to know is it an REO sale, short sale, court ordered sale, estate sale, relocation sale, some other type of non-arms length sale, or arms length sale

the first five choices are most obvious.

arms length are usually easy to spot when they are not one of the first 5 types and have been offered for sale on the open market for a reasonable amount of time.

was it offered for sale on the open market and the buyer just happens to be the ex-son-in-law, or is it a private sale only offered to this buyer?

 

[residentialguy]

"Non-Arm's length" is one of the grayest, non clarified, broad-brushed terms in the business.