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Non-Arm’s Length Transaction Home Loans

An Arm’s Length Transaction refers to a real estate purchase transaction in which both the buyer and seller are conducting business from an equal bargaining position, with neither party having any control or influence over the other.  In contrast, a Non-Arm’s Length Transaction is a purchase transaction in which there exists a business or familial relationship between the buyer and seller of a property.

Examples of  Non-Arm’s Length Transactions:

  • Buying or a home that is being sold by an immediate family member
  • Buying a home where the buyer previously short-sold the same property
  • Buying a home that is has been built by or sold by your employer
  • Buying a home that is being listed by a real estate agent that is your relative

Mortgage bank guidelines vary for Non-Arm’s Length Transactions.  Some banks will simply not provide funding for any of these transactions, while others will only provide funding if the transaction is being purchased as owner-occupied or a second home.

If you are involved in a Non-Arm Length Transaction, be sure to notify your loan officer as quickly as possible.  Ever since the mortgage meltdown, lenders have invested millions of dollars on complex background search technology that looks to identify relationships between the parties in a given transaction.

The Home Point’s Team has access to multiple investors that provide purchase financing for owner-occupied, second home, and investment properties that are considered to be Non-Arm’s Length Transactions.

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