An agent preparing a CMA identifies a recent parent-to-child transfer of a single-family home. The agent cannot confirm whether the transfer involved a gift, a below-market sale, or a full market-value transaction. What is the most important factor in determining whether this property can be used as a valid comparable?

Correct Answer

A) Whether the actual transfer price is available and reflects an arm's-length transaction at fair market value

A valid comparable for CMA or appraisal purposes must reflect an arm's-length transaction — a sale between a willing, informed buyer and seller acting without undue pressure, with neither party having a special relationship that influences the price. Parent-to-child transfers frequently involve gifts, partial gifts, or below-market pricing. Without confirming that the actual transfer price represents fair market value, the transaction cannot reliably indicate market value and should be excluded or used only with significant scrutiny.