Why is verifying arms-length nature important in the Sales Comparison Approach?

• A. To confirm zoning
• B. To ensure market-based price
• C. To verify title clearance
• D. To determine depreciation

Answer: (B)

In the Sales Comparison Approach, the value estimate rests on recent transactions that reflect what a typical buyer would pay under ordinary market conditions. Verifying that a sale is arms-length ensures the price shown in the sale truly represents a market-based price, not something distorted by relationships, coercion, or unusual concessions. When buyers and sellers act independently and no unusual incentives are at play, the transaction price better mirrors current supply and demand and the property’s true market value. If a sale isn’t arms-length—think related-party transactions, distressed or forced sales, or seller concessions—the price may be artificially high or low, skewing the comparisons and leading to unreliable adjustments or an inaccurate value. Zoning, title clearance, and depreciation each relate to different aspects of a property’s value, but not to ensuring that the comp price reflects fair market conditions.