Property ValuationIntermediateDelaware Exam

What does 'arm's length transaction' mean and why does it matter for appraisal comparables in Delaware?

ASimply a transaction where the buyer and seller happen to be physically at least 3 feet apart during the signing itself
BA transaction between unrelated, independent parties each acting in their own self-interestCorrect
CA transaction handled entirely by licensed attorneys in Delaware
DA transaction requiring both parties to be represented by real estate agents

Why A transaction between unrelated, independent parties each acting in their own self-interest Is Correct

Answer B: A transaction between unrelated, independent parties each acting in their own self-interest

An arm's length transaction occurs between unrelated parties, each acting independently and in their own interest, without compulsion, undue influence, or special deals. Delaware appraisers use only arm's length transactions as market value comparables — transactions between relatives, distressed sales, foreclosures, and related-party deals are typically excluded or adjusted.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

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