Mediation vs Binding Arbitration in Real Estate

Most real estate contracts contain clauses for these two procedures and while mediation is agreed to by all parties when they sign the contract, binding arbitration requires initialing. The why of that may be because they seem to be the same thing to some people, but they are very different. And while I have personally been through both activities as part of my own real estate transaction some years ago, once again I urge you to seek legal advice if you are considering either action.

Mediation is simply trying to talk your way through a disagreement with the aid of a a professional mediator. This is not between a buyer and a seller because each has an agent who negotiates for you in that arena. Rather, this is when you have a disagreement with your own broker over something and just can't work it out. So rather than hiring a lawyer and filing a lawsuit you sit face-to-face with an neutral third party to try and work through your disagreement(s). The mediator might be a retired judge or other professional and you pay for his or her services.

If this doesn't work and you have agreed in the contract to arbitration you are agreeing to obey the decision of the arbitrator and in the process, agreeing to give up two civil rights: trial by jury and the right to appeal. It is crucial that some one going into arbitration realize this ___ you can't hope a jury of your peers will decide the rights and wrongs, the arbitrator's decision is final and unappealable. This is why it must be separately intitialed on the contract, it's that important. In fact, if this clause is not initialed by both parties in the same way (both accept or both decline) the law says there is no contract.

Of course the idea is to avoid misunderstanding from the get-go and not have to go to either mediation or arbitration. This is partly why contracts are SO long and involved and, despite the work it takes, you should read every single line and ask all the questions that come to mind. That's what your Realtor is for. But once again if you are facing either of these actions and need legal advice, ask your lawyer.