In a non-arm's length transaction, the seller and buyer have a connection by marriage, family or other dealings, while the parties in an arm's length transaction have no connection. As a result, lenders often view the former type of transaction as a risk because the final price may not reflect the actual value of the property.Continue Reading
Borrowing money from the FHA for a mortgage usually requires a loan-to-value amount of 85 percent in a non-arm's length transaction, although this can be waived if the buyer has already been a tenant on site for a minimum of six months before the sales contract. Other exceptions include an employee of a home builder buying a house or relocation companies purchasing a home and then selling it to another employee moving into town.
Short sales are also an area of contention with non-arm's length transactions, as many lenders require an affidavit that the transaction is at arm's length. The nature of these transactions already raises red flags with lenders, because they are accepting a sale for less than the value of the home. Also, some non-arm's length transactions come with tax implications when a sale happens for a lower amount than the fair market value.Learn more about Credit & Lending
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Visa cards work by taking the place of cash in a purchasing transaction with a retailer, according to Visa. The cardholder presents the card or the card number to the retailer, who then charges the price of the product purchased to the card acquirer, which is the retailer's bank. The acquirer pays the retailer the funds charged, then charges the financial institution that issued the card to the cardholder. The issuer then collects the charged amount from the cardholder.Full Answer >
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