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Arms Length Transactions

By Scott Gormley

Mortgage and Lending with Oak Valley Mortgage-California Home Loans and Refinancing

September 25, 2006 03:19 AM

Today's Real Estate Term of the Day~

Arms Length Transactions:

Definition- A transaction in which the parties are dealing from equal bargaining positions, neither party is subject to the other's control or dominant influence, and the transaction is treated with fairness, integrity and legality. If discovered by a taxing authority, the absence of an arms length transaction may result in additional taxes incurred resulting from transfer at less than fair market value.

An increasing number of red flags have been crossing the desks of underwriters across the United States due to higher default rates. One of my account executives said that it is a major red flag when a person is in default on their existing mortgage and they are selling the property to another individual without the use of an agent while trying to obtain financing. Just a "heads up" for everyone!

Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.CALoan.com

"You find the perfect home, we'll find the perfect loan!"

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Bob Pavey

RE/MAX Hometown - Aventura, FL

CRS

Thanks for the Monday morning lesson

Sep 25, 2006 03:36 AM

Teri Isner

Keller Williams Realty at the Lakes - Orlando, FL

GRI, CRS, CIPS

Great picture now if the shirts said KW sponsorship would be a real win win arms length...

Sep 25, 2006 03:52 AM

Dave Rosenmarkle

Highland Realty, Inc - Fairfax, VA

33 years of providing fully satisfying service!

Going beyond the red flags. Do you have info on situations where they've called the note or taken other actions?

Sep 25, 2006 04:42 AM

Eddy Martinez

Nationwide Funding Group - Highland Park, CA

Great info. This trend is more and more noticeable.

Sep 25, 2006 06:05 AM

Ann Guy

NA - Allentown, PA

I have had underwriters request proof that certain transactions are non-arms length transaction.

I, too, love the picture. Very cute

Sep 25, 2006 07:28 AM

Nima Rezvan CT Lender CT Senior Mortgage Broker

Nima Rezvan Prosper First Funding Corporation NMLS#110681 - Fairfield, CT

First Time Home Buyer Expert - CT FHA Loans - FHA

Scott,

What happened to that deal? Rejected? Share!

Always,

Nima

Sep 25, 2006 09:33 AM

Scott Gormley

Oak Valley Mortgage-California Home Loans and Refinancing - Chico, CA

Rejected. There is no secondary market for such loans Nima...

Scott

Sep 25, 2006 09:40 AM

Sharon Simms

Coastal Properties Group International - Christie's International - Saint Petersburg, FL

St. Petersburg FL - CRS CIPS CLHMS RSPS

Not only are underwriters concerned about Unrepresented Sellers as noted above, but if someone has any hope of an offer being accepted subject to the sale of their home, they'd better have an agent and have it listed in MLS. It's often in the sellers' counter.

Sep 25, 2006 11:02 AM

Anonymous

Jim Newcomb

Can I list and sell my sons house in a short sale action??

Apr 03, 2010 08:36 AM

Apr 03, 2010 08:37 AM

#10

Jessica

Is it considered a "red flag" if the seller has defaulted on a mortgage that is associated to an inherited house and she is selling it to a family member for the appraisal price? The existing mortgage will be paid off in full once the sale is complete.

Jun 10, 2010 07:13 AM

#11

Tony and Suzanne Marriott, Associate Brokers

Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ

Haven Express @ Keller Williams Arizona Realty

Short Sale Buyers and Sellers who ignore the Arms Length requirements risk legal consequences - both criminal and civil.

Dec 14, 2010 12:43 AM

Comments(12)

Scott Gormley

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