Realtor® Speak 101: Arbitration and Mediation
San Antonio, we have a problem.
No one likes to talk about legal action when it comes to real estate. Let’s face it, no Realtor® wants to be involved in lawsuits or complaints against them and no consumer wants to have their home tied up in litigation or any serious legal problems. The fact is, it does happen. While we all work to make sure it doesn’t, legal matters do come up in the world of San Antonio real estate (and everywhere else for that matter).
There are many different ways to resolve legal conflict in real estate and thanks to the recent Hills of Rivermist slope failure, there is a need to speak about real estate conflict resolution. The word “arbitration” has come up in reference to the purchase agreements signed between Hills of Rivermist residents and Centex Homes, and although often confused with “mediation,” they are two different things altogether.
Real Estate Law
As this is a real estate law discussion, I must note that I am not a lawyer. Although I deal with legally binding documents and know and understand them, I am not here to give legal advice and advise all my clients (and all consumers) to read through their contracts carefully and seek a qualified real estate attorney if they are uncomfortable with anything they find in their contracts before signing them. Now that we’ve cleared that up, let’s continue.
Arbitration
I predict that arbitration will be on of the hottest words in San Antonio real estate this year. With The Hills of Rivermist residents battling it out with Centex Homes, arbitration has become a hot button issue here in San Antonio. According to reports, there was a mandatory arbitration clause in the homeowner’s purchase agreements that may just keep residents from suing Centex Homes.
So what is arbitration? A form of alternate dispute resolution, both parties agree to submit their case to a third party and act upon their decisions (binding arbitration). Non-binding arbitration does exist, but it is more similar to mediation (see below for more on that). The decision, when passed on is legally binding for both parties.
Home builders like mandatory binding arbitration to resolve disputes because it can be quicker and more efficient than a lawsuit. When it comes to home building, having your money and time tied up in the courts could be more costly than just face value of the legal action. Some opponents say it can also favor the home builder as the builder is a constant supply of work for the arbitration company.
Mediation
Mediation is similar to arbitration in that it involves a third party as a means of alternate dispute resolution. We use mediation quite often to resolve buyer and seller conflicts in San Antonio (and Texas overall). In Paragraph 16 of the “One To Four Family Residential Contract (Resale)” promulgated by the Texas Real Estate Commission, mediation is covered:
Paragraph 16. Mediation: It is the policy of the State of Texas to encourage resolution of disputes through alternative dispute resolution procedures such as mediation. Any dispute between Seller and Buyer related to this contract which is not resolved through informal discussion _will _will not be submitted to a mutually acceptable mediation service or provider. The parties to the mediation shall bear the mediation costs equally. This paragraph does not preclude a party from seeking equitable relief from a court of competent jurisdiction.
Using mediation to resolve these disputes allows for buyers and sellers to work with a mediator to find a middle ground to their dispute, but is non-binding. Neither party must obey the decisions of the mediator (who works with the parties as opposed to arbitration where the arbiter makes their decision independently of the parties) and there is still potential for legal action if the parties can not come to terms.
I encourage mediation as a first step to resolve any legal conflict arising from home buying and selling as it can be less costly, more timely, and resolve the issues without legal action. If the issues are not resolved, a real estate attorney should be contacted and options discussed from there.
photo courtesy of nolene
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- Residents in Texas landslide balk at arbitration (sfgate.com)
- Sinkhole Opens Up in Centex Homes’ Hills of Rivermist (rerockstar.com)
- Rivermist Homewowners Want Answers (ksat.com)
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Comments
“Mandatory Binding Arbitration: Unfair and Everywhere” (http://www.homeownersoftexas.org/ARBITATION-mandatory-binding-unfair-and-everywhere.html) is a good reference.
Also, our webpage, “San Antonio ground collapse and sinkhole gets national attention” (http://www.homeownersoftexas.org/San-Antonio-Sinkhole.html#lawyers) continues to grow, with over 23 videos now posted. We also add reader comments to the most significant news stories and continue to write on our own blog.
Wayne – Both great articles, thanks for sharing them here. I also loved your home buyer tax credit article. There are many of us in the industry who didn’t like the idea of extending and expanding it. I’m all for helping homeowners, but this wasn’t a great solution and (as you mentioned) only created a false sense of demand, which is never helpful. Letting the markets adjust on their own is really the only solution – let buyers decide when they want to buy – they will when they’re ready.
rerockstar´s last blog ..San Antonio Home Builders: An Open Letter
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