Arm's Length Transaction

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Arm's Length Transaction

A transaction in which the buyer and the seller have no significant, prior relationship. In an arm's length transaction, neither party has an incentive to act against his/her own interest. That is, the seller seeks to make the price as high as he/she can, and likewise the buyer seeks to make it as low as he/she can. The negotiations for an arm's length transaction result in the arm's length price, which is almost always close to the market value of the asset being sold. The term is often used in real estate transactions because family members often sell property to each other at something other than the arm's length price.
References in periodicals archive ?
It was the Dinkins administration's inflexible policy of setting assessments based on 45 percent of inflated sales prices, and then its stubbornness at maintaining the high assessments - even in the face of arms length transactions at vulture prices - that led to so many foreclosures when the low rents and large vacancies in places like Downtown Manhattan could not cover the high taxes.
The sales were completed through arms length transactions with an unaffiliated buyer.