Sales data should not be used to determine value if?

Sales data should not be used to determine value if the sale is not an arms-length transaction. An arms-length transaction refers to a deal where both parties are acting in their own self-interest and are not under any duress or special circumstances that could influence the transaction. Such transactions reflect fair market value, where there is genuine negotiation and an equitable exchange.

When a sale is not conducted at arms-length, it often distorts the true value of the property. For example, if a sale occurs between family members, or between parties with a close relationship, the transaction price may not accurately reflect the market conditions or the property’s actual worth. Therefore, using this type of sales data could lead to inaccurate appraisals that do not reflect the true value in an open market scenario.

While other factors like market instability, uniqueness of the property, or the timeliness of the appraisal can affect the reliability of sales data, they do not inherently negate the validity of the data in the same way that a lack of an arms-length transaction does. In essence, ensuring that transactions are arms-length is crucial for obtaining credible and reliable data for appraisals.