Foreclosure Sales

Foreclosure sales are generally considered invalid as arm's-length transactions if they involve:
  • Charitable, religious, or educational institutions
  • Financial institutions as buyer or seller
  • Forced sales resulting from a judicial order
  • Government agencies
  • Sales of doubtful title
  • Sales settling an estate
  • Transactions between rela­tives or corporate affiliates

Arm's-Length Sales

A foreclosure sale usually does not have the same market value as an arm's-length sale in a healthy market. Compared to an arm's-length sale, a foreclosure has a number of hurdles that must be crossed before it can be considered a compa­rable. Foreclosures from Freddie Mac (Federal Home Loan Mortgage Corporation) are usually auctioned off, requiring a cashier's check for the entire price on the day of the auction. An arm's-length sale occurs when both parties act in their own best interest with no duress to complete the transac­tion. Typically, a foreclosure sale represents a wholesale or discounted price rather than a retail price.