Here in California, simply using the C.A.R. purchase agreement stipulates that both parties will agree to mediation. The buyer has a choice of choosing arbitration and both parties must agree to this or agree to not agree. I always advise my clients that if you want to impress the seller and get the house agree to what they agree to insofar as arbitration is concerned, and remember, mediation is non-binding and arbitration is binding.

Thu Mar 27 2008, 20:55

Hi Robin:

I used to advise my clients to sign that, but not after I hear another agent's reasoning. When you are initially making an offer on a house, you don't know what kind of problems you might be dealing with.

If both of you agree to that right there and then, you are agreeing to something which might or might not be beneficial later, depending on the real situation that will come up.

Not agreeing to this now does not mean the person likes to sue, it just means the person wants to reserve the right to choose when the time comes. Because If you don't agree to that now, when situation arives, you can still choose to use arbitration if the situation fits.

The right to choose depending on the situation, to me, is a bigger reason than expense alone.

Sylvia

Sat Feb 16 2008, 10:40

This response comes from someone with much new home sales experience: it was a big deal when,a few years ago, the arbitration clause was added to a national builders contract for whom I worked. It was put there to protect the builder from costly legal fees,and eliminated the possibility of a jury trial (to the extent that it's possible). While a typical seller might have far less to lose, I'd be wary of the implications- legal advice would be a very good idea. Whether or not arbitration costs have shot up seems irrelevant- it's the "final" decision that I'd want on my side, were it ever to come to that (which arbitration provides). From the employee of a builders perspective, the fact that it was initially an addendum indicates that it's quite in favor of the party requesting it. I'd have a lawyer take a look.

Tue Jan 29 2008, 15:23

Rules of evidence are more relaxed in Arbitration, and many times this fact alone convinces anyone selling who might be an attorney or other legal professional not to agree to Arbitration. Re: Seller being an agent - sounds a bit like he wants to make resolution of disputes very expensive for any buyer - litigation is much more time consuming and expensive. Arbitration many times assumes the buyer is the innocent in a purchase and doubly so with an agent or broker seller. Be concerned! Liz

Tue Jan 29 2008, 15:15

Robin, I always have my sellers/buyers sign the arbitration and liquidated damages clause. Why not? What's there to hide? Your agent can make your offer contingent upon the seller signing these clauses. Good luck.

Tue Jan 29 2008, 14:13

If it were me buying the house I would be very apprehensive that a seller (especially being an agent) would not sign that clause. Chances are you will never need to go to court. I'm not sure that it would stop me from buying the house...

Make sure you get all your inspections done and do your homework...I've seen buyers not want to sign but they eventually do because most sellers do not want to enter into a contract without the arbitration clause being a apart of the deal.

Tue Jan 29 2008, 13:45

Robin -

When you say the seller is refusing to agree to arbitration it is unclear whether or not they initialed the mediation/arbitration paragraph of the purchase contract or is this what they are not willing to agree to (sign)?

Your broker is correct in saying that the arbitration process can be more expensive than a direct legal suit.
http://www.castlelaw.com/arbitration.htm

No matter what the details are, you need to be comfortable with the your legal options entering into, or as a result of a contract component. If you are not sure, it is always best to check with a real estate attorney.

I have had sellers not willing to sign arbitration as the decision of an arbitrator is binding. (No appeals) For arbitration to be enforceable all parties must initial the paragraph outlined by the contract under arbitration.

CJ

Tue Jan 29 2008, 13:43