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
Sales of doubtful title
Sales settling an estate
Transactions between relatives or corporate affiliates
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.