Dear Sue,
I had my real estate agent write an offer on a home that I intend to live in forever.
This is my first home purchase so I am not familiar with the legal terms in the purchase contract.
My agent advised me not to initial the mediation/arbitration clause. He said that I would give up my legal rights if I signed it. I don’t understand. How can one give up legal rights?
I told him that I didn’t want to sign something that I wasn’t sure of so I took my incomplete contract home with me.
What now?
~ Want to Know Buyer
Dear Buyer,
I applaud your willingness to walk away from the table when you have doubts.
I would suggest that you consult a real estate attorney. He/she will give you the pros and cons of choosing mediation or arbitration.
Arbitration is a process in which parties to a dispute hire a neutral person, known as an arbitrator, to listen to each side and review the evidence that is presented.
The arbitrator then renders a decision that both parties have agreed to abide by.
The arbitrator’s decision is a binding one. In other words, if one is unhappy with the outcome of the arbitration, one can’t demand a court trial after arbitration is concluded.
Mediation is a process in which parties to a dispute hire a neutral third person known as the mediator. The mediator facilitates discussion and negotiation between the parties with the goal of helping the parties reach a settlement of their dispute.
The mediator can’t impose a result on the parties. The parties must voluntarily agree to make the results of the mediation binding.
According to the California Association of Realtors, arbitration has advantages as well as disadvantages. Arbitration is quicker, one can have an attorney present, it costs less than litigation and it’s private.
The arbitrators are experienced in the field of the dispute, reducing the need to educate while providing greater assurance that the award will be made by a knowledgeable person.
Arbitrator’s overseeing real estate disputes are retired judges or an attorney with at least five years of real estate experience. The awards are final, binding and legally enforceable.
The disadvantages of arbitration are the limited right of review of an arbitration award, the necessity of a court action if a party fails to comply with the award and the parties must pay for the services of the arbitrator.
Under arbitration there is no right of appeal. However, an arbitrator has the power to correct an award.
Avoiding disputes is the best option but in my opinion, choosing arbitration over litigation is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors in Auburn. She can be reached at seesue@seehometown.com, or on the web at homedollarsandsense.com.
