Why does it matter whether it is an arm’s-length sale or not?Ĭhris Opferof Mason-McDuffie Mortgage explains. Instead of the seller acting in his best interest with the highest price, the parent offers the child a discount, which means it is a non-arm’s-length transaction. The classic example of a non-arm’s-length transaction is a parent selling to a child. The concept of an arm’s-length transaction is to ensure that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party” ( Ivestopedia). What is an “arm’s-length” sale? “It is a transaction in which the buyers and sellers of a product act independently and have no relationship to each other. There wasn’t a buyer in this situation of course, but still there is something important here to note with the concept of “giving away” a property – or in other words selling at a price that really doesn’t reflect the market. Now with that story fresh in mind, let’s consider the concept of an arm’s-length transaction. The sports car owner was on the cusp of divorce and his soon-to-be ex would’ve potentially gotten the car anyway, so this was really more about dumping an asset instead of random kindness. ![]() Nice stranger, right? A couple of news outlets even covered the story about this stranger’s generosity. ![]() I was shocked when he told me someone came up to him and handed him keys to a Porsche. I knew a guy who was once given an expensive sports car.
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