What is a non-arm's length transaction?

Non-arm's length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing.

What is a non-arm's length home sale?

A non-arm’s length transaction is when the buyer and seller have a personal relationship. A sale between friends, family or co-workers is considered to be a non-arm’s length transaction. With a non-arm’s length home sale, self-interest may not be the motivation – like a parent selling their home to an adult child.

What is an arm's length transaction?

Arm’s length transactions are what most people engage in when they purchase a home. Arm’s length transactions occur when two parties who don’t have a professional or personal relationship participate in a real estate deal and each side acts in their own self-interest. Purchasing a home from a stranger counts as an arm’s length transaction.