Property Valuation
The 'arm's length transaction' assumption in appraisal means that:
AThe parties are at least 3 feet apart during negotiations
BNeither party is under compulsion and both have reasonable knowledge of relevant facts✓ Correct
CThe transaction was completed without real estate agents
DThe sale was completed in less than 30 days
Explanation
An arm's length transaction involves unrelated parties, each acting in their own self-interest, with neither under undue pressure to complete the transaction. Sales between related parties (family members) may not reflect true market value.
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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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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