![]() ![]() Therefore, an arm's-length affidavit may be required by the lender. In a short sale, the price of the property is less than the amount of the total mortgage owed. Lenders must do an in-depth investigation when checking your finances as a way to protect themselves from any illegal activity. Government and individual lender guidelines must be followed as protection. They often don't have a real estate agent working with them to tell them otherwise and then pay way more than the house's market value. An unsuspecting family member may not question the price of a home from an untrustworthy relative. In a non-arm's length transaction, one party may take advantage of another party. It craves the opposition of buyer and seller, supply and demand, or consumers and producers. The real estate market depends on the competition in arm's length transactions to coordinate prices. Perhaps they agree to deceive lenders so that they both end up profiting. When the buyer and seller know each other, they can better execute how the transaction would benefit them or possibly fraud. This type of relationship could be neighbors, co-workers, friends, and obviously, family. When the buyer and seller know each other, it's called a non-arm's length transaction. Essentially, when you purchase a home from a stranger. ![]() This is called an arm's length transaction. They're entirely acting in their self-interest. Most people buy homes without knowing the seller personally or professionally. There are two categories in real estate transactions: arm's length and non-arm's length. ![]()
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