An arms-length transaction implies which of the following about buyer and seller?

• A. Involves family members.
• B. An arms-length transaction implies: Buyer and seller act in their own best interests without collusion.
• C. The price determined by forced sale.
• D. Sale is subsidized by government.

Answer: (B)

An arms-length transaction means the buyer and seller are independent and act in their own best interests, with no collusion or undue influence from relationships. This independence is what keeps the agreed price aligned with market conditions, not with personal motives or special arrangements. In appraisal, such transactions are valued as reliable indicators of market value because neither party is advantaging a related party or being coerced.

That’s why the statement describing buyer and seller acting in their own best interests without collusion is the best fit. Involving family members would introduce related-party influence, a forced-sale price isn’t reflective of typical market conditions, and government subsidies distort the transaction price.