Which term describes a sale between related parties that should be avoided in analysis?

Which term describes a sale between related parties that should be avoided in analysis?

• A. Arms-length transaction
• B. Non-arms-length transaction
• C. Market rent
• D. Highest and best use

Answer: (B)

In appraisal practice, you want transactions that reflect true market behavior—independent, open-market deals where neither party has undue influence. A sale between related parties often carries incentives or arrangements that can distort price and not reflect what a typical buyer would actually pay in a true market, so those transactions should be avoided in analysis or used with caution. This specific term captures that situation: a non-arms-length transaction. By contrast, an arms-length transaction is exactly the independent, market-driven sale you want for comparisons, market rent refers to rental value in the market, and highest and best use is about the property's optimal legal use.

In appraisal practice, you want transactions that reflect true market behavior—independent, open-market deals where neither party has undue influence. A sale between related parties often carries incentives or arrangements that can distort price and not reflect what a typical buyer would actually pay in a true market, so those transactions should be avoided in analysis or used with caution. This specific term captures that situation: a non-arms-length transaction.

By contrast, an arms-length transaction is exactly the independent, market-driven sale you want for comparisons, market rent refers to rental value in the market, and highest and best use is about the property's optimal legal use.