Property ValuationIntermediateDelaware Exam

What does 'arm's length transaction' mean in a Delaware real estate appraisal?

AA transaction where both parties are at least one arm's length apart physically

BA transaction between unrelated parties, each acting in their own interest with reasonable knowledge, and neither under undue compulsionCorrect

CA transaction where no attorney is involved

DA transaction conducted at a distance without in-person meetings

Why A transaction between unrelated parties, each acting in their own interest with reasonable knowledge, and neither under undue compulsion Is Correct

Answer B: A transaction between unrelated parties, each acting in their own interest with reasonable knowledge, and neither under undue compulsion

An arm's-length transaction is one where both parties are independent (not related), knowledgeable, acting in their own best interests, and neither is under unusual compulsion to transact. Arm's-length sales are the basis for market value estimates.

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.

People Also Study

Key Terms to Know

Appraisal

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

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Study This Topic

Property Valuation Guide

Practice More Delaware Real Estate Questions

1,500+ questions covering all exam topics. Start free — no signup required.

Take the Free Delaware Quiz →