Sellers' debate: Arbitrate or mediate?

DEAR BERNICE: We just received an offer on our home. In the offer, the buyers had checked both the binding arbitration provision and the mediation provision. It also said that if we agreed to these provisions, we would be giving up our right to sue. What should we do? Our agent said she couldn't advise us on this. --Randy P.

DEAR RANDY: First, your agent was correct. Unless the agent is a licensed attorney, the agent could lose his or her license for giving you legal advice. Having said that, many Realtor associations have this language in the boilerplate of their contracts.

When I was selling in California, the state-approved contracts allowed the buyers and sellers to agree to mediation and/or arbitration. During mediation a professionally trained mediator helps the parties arrive at their own resolution to the problem. Based upon the research from the dispute resolution department of the Pepperdine Law School, people are more likely to perform when they reach an agreement through mediation as opposed to arbitration or litigation.

In binding arbitration, the parties agree to give up their right to go to court and to permit an arbitration firm to determine the outcome of any future disputes. Many people prefer arbitration because it is often faster and less expensive than litigation. For example, if you were in a dispute about a home in Los Angeles, it could take up to five years to get your case on the Superior Court docket. Arbitrations can be scheduled within weeks or even days. 

Arbitrations are normally less expensive than litigation. If you were litigating a dispute, you could easily spend tens of thousands of dollars in depositions and pretrial preparation. If you fail to resolve the dispute and go to trial, you could face tens of thousands more in fees.

Even if you win, you still have the issue of collecting the judgment. One tactic I saw some builders and developers use was to form a separate LLC (limited liability company) for each project they did. If there was a judgment against the LLC, they just bankrupted the LLC and continued doing business under a new LLC.

Even though binding arbitration has some advantages, there has been considerable controversy about its use. If you don't like the outcome, you will find it difficult to appeal the decision. You probably won't have access to a jury trial. There are a number of other issues that might make you think twice before agreeing to binding arbitration.

The best course of action is to mediate any dispute if at all possible. In terms of arbitration vs. litigation, speak with a competent attorney who can advise you on which solution is best for you and your circumstances.

DEAR BERNICE: We have lived in our home for 30 years and will be moving to a retirement community near our children. We have never sold a home before and we're wondering about how much we can expect to net from our sale. I know many agents charge a 5 or 6 percent commission, but are there other fees as well? --Sue R. ...CONTINUED

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