What is an “arms length transaction”?

 
An “arms length” transaction is a legal term where the short sale buyer and seller are independent and on equal footing.  Also the parties must not have any underlying agreements or promises to each other. 
 
In a short sale agreement, short sale lenders require the buyer and seller to sign an affidavit promising that they are not family members, business partners, nor is there any underlying arrangement where the seller benefits outside of the short sale transaction.  This is because the bank is accepting less than what is owed through a short sale, and they do not want to see the seller benefit unfairly or make money off the transaction.

If you have any questions about this, please feel free to contact us.