Table of Contents
- What Is an Arm’s Length Transaction in Real Estate?
- Why Arm’s Length Real Estate Transactions Matter
- When Arm’s Length Real Estate Transactions May Not Occur
- Transaction Coordination in an Arm’s Length Transaction
- Trust AgentUp for Outstanding Transaction Coordination
An arm’s length transaction in real estate involves non-related, independent parties acting in their best interests. In other words, the buyer and seller are not relatives or close friends.
Arm’s length transactions are the most common sales type and are crucial for accurate property valuations, fair taxation, and investor confidence.
This article explores arm’s length transactions and explains why they are essential for a functioning real estate market.
What Is an Arm’s Length Transaction in Real Estate?
In real estate transactions, “arm’s length” describes a deal between two independent parties with no special relationship. An existing relationship tends to influence the terms of a non-arms length transaction.
For instance, it’s unlikely that a transaction involving a father and his son would yield the same result as a deal between strangers because the father may give his son a discount.
In arm’s length sales, it is assumed that the buyer and seller seek their advantages and maximize the financial outcome.
Here are some characteristics of an arm’s length real estate transaction:
- Both parties involved in the transaction are acting independently of each other
- The buyer and seller are not related or have any business or personal relationships that could influence the terms of the deal
- Therefore, it is assumed that the property is sold at its fair market value, which is the price a willing buyer would pay to a willing seller in an open market
- Neither party exerts undue influence or coercion and is free to negotiate the terms of the deal without pressure
- Each party is informed of all relevant information about the property, including any defects, liens, or other encumbrances
Roughly 98% of residential real estate sales are arm’s length. Let’s go a bit deeper to understand why this matters for the real estate market.
Why Arm’s Length Real Estate Transactions Matter
Whether or not a transaction is at arm’s length matters because it can have pricing, legal, and tax implications.
In an arm’s length transaction, the buyer and seller want the best price for their part of the financial transaction.
One of the best ways to achieve this is to conduct an arm’s length transaction. Being at arm’s length means no personal factors influence the price and the decision to accept or reject an offer.
Those who execute non-arms-length transactions may not get the highest price, affecting the overall market and lending decisions.
Consider the following benefits of arm’s length real estate transactions:
- They provide a reliable benchmark for property valuations. By analyzing arm’s length transactions, appraisers can determine the fair market value of a property
- Tax authorities use arm’s length transactions to determine the appropriate level of property taxes
- Many legal and regulatory frameworks require conducting real estate transactions at arm’s length
- Arm’s length transactions help to build investor confidence in the real estate market. When investors know that deals are fair and transparent, they are more likely to invest
For example, if a real estate sale between father and son is taxable, tax authorities may disregard the actual price paid by the son.
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Real Estate Transaction Coordinators
Hand off your transactions, media, and marketing to a real estate TC.
When Arm’s Length Real Estate Transactions May Not Occur
While most real estate transactions are conducted at arm’s length, there are some situations where this may not be the case. These include:
- When the buyer and seller are related, such as family members
- Sales prompted by a divorce where either of the former spouses may be under duress
- Transactions between coworkers, employers, and employees, or business partners
- In a distressed sale, the seller may be forced to sell the property quickly and may accept a lower price than the fair market value
- The sale is usually not arm’s length when a property is sold due to a foreclosure or bankruptcy
- An insider deal in which someone has access to non-public information that could influence the price of a property
Ultimately, arm’s length real estate transactions encourage fair and reasonable business practices, protect the public, and ensure the integrity of real estate price evaluations.
Transaction Coordination in an Arm’s Length Transaction
As we have explained, in an arm’s length real estate transaction, the buyer and seller do not usually know one another. Therefore, it is vital to have a neutral and objective manager for the transaction.
Real estate transaction coordinators do not have an agency relationship with the buyer or seller. Therefore, they can act as neutral facilitators in arm’s length transactions.
Buyers and sellers are often put at ease when they learn a transaction coordinator is working on their closing. They know they can trust the TC to be fair and transparent.
Acting as a non—partisan intermediary for the buyer and seller, the transaction coordinator can impartially perform the following functions:
- Review and analyze all contracts and disclosures to ensure accuracy, completeness, and adherence to legal and regulatory requirements
- Ensure strict compliance with all applicable laws, regulations, and industry best practices throughout the transaction process
- Cultivate and maintain open lines of communication with all stakeholders, including mortgage lenders, title companies, clients, and their respective agents
- Promptly address and resolve any questions or concerns clients, agents, or other relevant parties raise
- Provide regular status updates to clients, informing them about critical milestones and potential roadblocks
- Distribute inspection reports to all relevant parties, including clients, agents, and lenders, and explain any identified issues clearly
By effectively managing these tasks from a neutral, impartial perspective, a transaction coordinator can be trusted by both sides of the sale, minimizing potential delays and complications while maximizing client satisfaction.
Market Leading
Real Estate Transaction Coordinators
Hand off your transactions, media, and marketing to a real estate TC.
Trust AgentUp for Outstanding Transaction Coordination
AgentUp is a real estate industry leader providing nationwide transaction coordinator support for brokers and agents.
Each AgentUp transaction coordinator is highly trained, fluent in English, and has real-life experience working in the US real estate industry.
For the past decade, AgentUp has partnered with real estate sales professionals, helping them expertly manage their real estate transactions from start to finish.
AgentUp Transaction Coordination Packages
AgentUp offers everything you need to close your arm’s length real estate transactions efficiently and on time.
Take a look at the company’s transaction coordination service options.
Transaction Coordination: Starting at $299 per file, we handle the details of each sale so you can focus on building your business.
We also make hiring a full-time or part-time virtual transaction coordinator to meet your needs easy. Explore our pricing here.
Additionally, we offer listing coordination – starting at $199 per listing. Our comprehensive listing services include professional photography, essential paperwork, and seamless MLS input.
So, do yourself a favor. Take the first step today toward business growth and smoother transactions.
Schedule a free call today. We’ll explain how AgentUp can help match you with the best TC services at the most competitive price.
AgentUp TCs Will Do Your Marketing, Too!
AgentUp transaction coordinators stand out from TCs at other companies because they provide marketing support.
When not working on your transactions, an AgentUp TC will work on marketing your listings and professional services, including social media coordination.
Moreover, AgentUp TCs have all of AgentUp’s cutting-edge digital marketing solutions at their disposal, including the following:
- Virtual tours
- Property websites
- Home flyers
- House portraits
- Real estate photo editing
- And AI virtual staging
These services are also available in a convenient marketing coordination package, which includes photography services, photo editing, AI virtual staging, floor plans, and more!
To explore these affordable and effective marketing tools, sign up for a free AgentUp account.
Thank you for reading this post on what an arm’s length transaction in real estate is. If you enjoyed this post, check out these other related articles:
- Who Pays the Transaction Coordinator Fee – Agent or Seller?
- Best Transaction Coordination Services in 2025
- Can a Transaction Coordinator Post a Real Estate Listing?
- 4 Benefits of Real Estate Transaction Coordinators for Agents
- What’s the Difference Between a Dedicated Transaction Coordinator and a Regular TC?
