In a sales comparison analysis, ignoring arms-length status could lead to what result?

• A. Accurate market value
• B. Biased value conclusions
• C. Correct depreciation
• D. Correct capitalization rate

Answer: (B)

In a sales comparison analysis, arms-length status ensures the data reflect typical market behavior, with buyers and sellers acting independently and no unusual concessions influencing the price. When you ignore that status and include non-arm’s-length transactions—such as related-party deals, distressed sales, or seller-financed arrangements—the price can be affected by factors other than true market conditions. This introduces elements like relationship-driven pricing or special terms, which pull the comparables away from what would occur under normal market conditions. As a result, the appraisal tends to produce biased value conclusions rather than an accurate reflection of market value. The other outcomes—accurate market value, correct depreciation, or correct capitalization rate—aren’t guaranteed simply by ignoring arms-length status; they rely on adjustments and broader data to represent the market.