Appraisal Fundamentals
Seller Concessions & Arm's-Length Transactions
Not every sale price tells the full story — here's how appraisers verify the conditions behind a comparable sale.
A comparable sale's stated price isn't automatically its true market-value indicator. Before relying on it, appraisers verify the conditions behind the transaction — including who paid for what, and whether the sale was genuinely at arm's length.
Two Things Worth Verifying
Seller Concessions
Costs the seller agrees to pay on the buyer's behalf — closing costs, rate buydowns, or repair credits — that can effectively lower the buyer's true cost below the stated sale price.
Arm's-Length Transactions
A sale negotiated between unrelated, willing parties, each acting in their own interest without unusual pressure — the baseline assumption for market value.
A Practical Example
A home sells for $400,000, but the seller agreed to pay $12,000 toward the buyer's closing costs as part of the negotiation. Using $400,000 as a straight comparable would overstate the property's actual market-supported value — the appraiser adjusts to reflect what the sale truly indicates once that concession is accounted for.
What This Does Not Mean
Concessions aren't inherently improper, and a sale with concessions isn't automatically disqualified as a comparable — it just requires verification and, where appropriate, an adjustment. Likewise, a non-arm's-length sale (like a transfer between family members) isn't "wrong"; it's simply not reliable market evidence on its own.
Frequently Asked Questions
Provided for general educational purposes based on Fannie Mae Selling Guide comparable sale verification standards. Last reviewed: August 2026.