Property Valuation
In Michigan, an ARM's length transaction used in appraisal comparables means:
AThe buyer and seller stood within arm's reach during the transaction
BThe buyer and seller acted independently with no special relationship influencing the sale✓ Correct
CThe property was sold at exactly market value
DBoth parties used the same attorney
Explanation
An arm's length transaction is one where the buyer and seller are independent parties, each acting in their own best interest without pressure, and the price reflects fair market conditions.
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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.
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