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What is Arms-Length Transaction

A transaction between a buyer and seller where both are acting in their own best interests to get the best price. Presumably, the seller wants the highest price possible, and likewise the buyer wants to pay the least possible. This ends up determining the fair market value of the home. The majority of private party real estate transactions proceed in this way.

An example of a deal that is not an arms-length transaction would be a father selling his home to his son. In that case, the father would likely give the son a large discount and the home would sell far below market value.