Have you heard of the term arbitration in the context of real estate? Arbitration is an option that buyers, sellers, and even agents can agree to if they have a dispute during the sale or purchase of a property.
You can also agree to arbitration before any issues come up by including it in your sales contract. This means that instead of going to court, you and your opponent choose an arbitrator who will make a binding decision about your case.
In this article, I am going to be explaining everything you need to know about Arbitration in real Estate, its pros and cons, and a lot more. So if you want to know about it, kindly read this article till the end.
What is Real Estate Arbitration
While arbitration is a common concept for other contracts, most people may not have heard of it when it comes to real estate. As a buyer or seller, knowing about arbitration can benefit you because it can help save time and money. While you don’t have to hire an arbitrator if you don’t want to, understanding what it is will help ensure your contract is as fair as possible.
Arbitration, which can be defined as the action of arbitrating or being an arbitrator, is one way in which real estate attorneys can resolve disputes between buyers and sellers of properties.
But what is arbitration in real estate? In legal terms, it describes the process by which two sides with opposing interests come together to try to resolve their disagreement in such a way that both sides feel like they got something out of the arrangement.
The Pros and Cons of using arbitration in Real Estate
Below are some of the pros and cons of arbitration in real estate
Pros
- It is a quick and cost-effective way to resolve a dispute. You can avoid court costs, legal fees, and wasted time.
- The arbitrator has no stake in your case. He or she will not be swayed by any of your personal connections, such as an attorney or friend.
- The arbitrator is impartial. He or she will base his or her decision on evidence, not emotions.
- The arbitrator’s decision is legally binding. You have no choice but to accept it and move on with your life.
- An arbitration award can be enforced by a court order. This means that if you do not comply with an arbitration award, you could be held in contempt of court and face penalties like fines and even jail time.
Cons
- The arbitrator’s decision may not be legally binding. This means that you could ignore it and not face any consequences. However, if you do choose to ignore an arbitration award, you could face a lawsuit for breach of contract.
- You may have to pay filing fees, arbitration fees, and other costs associated with the arbitration. These can add up quickly.
- You have to take time off work and travel to an arbitration hearing. This can be a hassle if you are working full-time or do not live close to where your arbitration will be held.
- The arbitrator’s decision may not be what you want it to be. He or she is only human, after all, and humans make mistakes.
How Much Does Real Estate Arbitration Cost?
In most cases, real estate arbitration is a cost-effective alternative to an expensive and drawn-out court case. Due to confidentiality agreements, there’s no way of knowing how much it costs any individual party to file an arbitration request or participate as a party.
The laws of your state may allow you to recover some of these expenses if you win your case, however.
But in most cases, real estate arbitration can cost anywhere from $500 to $5,000. The exact amount you’ll pay will depend on a number of factors including:
- The location of your case.
- The complexity of your case.
- How much you are willing to spend on legal fees.
If you have a straightforward case and don’t mind spending money on legal fees, then you might be able to get away with paying less than $1,000 for an arbitration hearing.
What Happens When Seller Does Not Agree to Arbitration and Mediation?
If the Seller Does Not Agree to Arbitration and Mediation, Can You Still Sue?: Yes. You can still sue even if your contract says you have to go through arbitration or mediation. But it is a good idea to see if you can settle things out of court before going through with a lawsuit.
What is Arbitration Clause in Real Estate Contract?
Arbitration Clause in Real Estate Contract is a legally binding clause that can be used to resolve disputes between parties. In most cases, arbitration clauses are written into real estate contracts.
This clause allows for a third party to decide who wins and loses when there’s a dispute over a contract. It’s an alternative to going to court.
When you sign an agreement with an arbitration clause, you agree that any disputes will be resolved through arbitration instead of going before a judge or jury.
FAQ
What is an example of arbitration?
An example is in the case of a divorce where the two parties cannot come to an agreement, a third party will be introduced to help in the negotiation.
What are the three types of arbitration?
- Institutional arbitration. Institutions arbitrations are cases in which an outside organization with specialized knowledge is appointed to act as the administrator.
- Ad hoc arbitration. …
- Domestic and International Arbitration
What is arbitration What is its purpose?
Process for deciding disputes between two or more parties outside of a court system with a decision enforced by an impartial third party. Both parties must agree to the use of an arbitrator and certify that they will obey the arbitrator’s decision.
What is the process of arbitration?
The parties and arbitrators gather in person for the hearing, during which the parties present their arguments and evidence in favor of their respective causes.
The arbitrators consider the facts of the case after the hearing and issue a written judgment known as an award.
Conclusion
If you’re having a dispute with a seller or buyer and can’t agree on how to settle it, hire an arbitrator. An arbitrator is trained to be fair and impartial, meaning she has no financial interest in your outcome other than earning her fee.
There are many real estate arbitration companies out there, which means you have plenty of options when selecting one. Be sure to choose carefully and ask for references.
I hope that you have fully understood What arbitration in real estate is, however, if you have any questions regarding this topic, you can use the comment section below.
