What is an Arm's Length, Bona Fide Sale?

An Arm's Length, Bona Fide Sale refers to a transaction between two parties who are unrelated and act in their own self-interest. This type of sale is characterized by the open negotiation of price and terms, reflecting true market value without any coercion or undue pressure influencing the transaction. The integrity of the sale is preserved because both parties have equal bargaining power, ensuring that the deal is made fairly based on mutual agreement rather than personal relationships.

This concept is essential in real estate and appraisal contexts, as it helps to establish clear market conditions, allowing appraisers and buyers to gauge the fair market value of a property based on comparable, legitimate sales. Transactions that deviate from this standard—such as secret sales between family members, forced sales at public auctions, or sales with inflated property values—can distort the understanding of the true market value, making them less reliable for pricing or valuation purposes. Thus, the correct answer represents the best practice for ensuring transparent and fair property transactions.