How arbitration works for homebuyers

Question: Dear Kari, I have not bought a home for many years, and I do not recall it being so complicated. I would like to think of myself as a rather up-to-date person. But when my real estate agent was explaining the purchase contract she wanted me to sign, I really got lost with the part regarding arbitration. Could you please provide me with a simple explanation and not one that would give me a headache? Answer: I will do my best to shed light on this topic for you. The standard California purchase contract contains a provision for buyers and sellers to choose to work with arbitration or litigation in the event a conflict arises that cannot be resolved. The arbitration clause in the purchase contract allows buyers and sellers to agree or decline arbitration. Arbitration and litigation can seem intimidating when it comes to your future home purchase. In most cases, real estate sales carry on smoothly with minor bumps in the road. This is where real estate professionals come in handy, as they are able to resolve most conflicts that arise. When a conflict arises that cannot be resolved, then there are further legal options. If you think you are interested in arbitration, you would be wise to sign the agreement and lock in that option. In the event you decide to wait, then you may be forced into litigation. If both buyer and seller agree to arbitration, then it can be used to resolve a conflict. The arbitrator can be a retired judge or attorney with at least five years of real estate experience. Arbitration is typically private and less intimidating than other options. The formal rules of the courts do not apply. Each party submits their evidence to the arbitrator and is allowed to have an attorney, but it is not necessary. During this process, both parties are allowed to call witnesses, cross-examine witnesses and make arguments to the arbitrator. Additional requirements include written statements from each party's position in advance. Once the hearing is finished, the arbitrator is allowed several days before offering the decision and the award. This process can be scheduled and resolved quickly. Arbitration is usually more time-efficient and cost-effective than other options. Good to know, the result of arbitration is binding. To be clear, if you use arbitration, neither party has the right to appeal and must live with the outcome. Litigation is a formal process where both parties submit evidence to a judge and jury and rely on them to make a binding decision regarding the dispute. During litigation, formal rules and procedures of the court are strictly adhered to. Litigation is public record. Typically, both parties invest in their own legal representation. Litigation is very expensive and time-consuming. In most cases, the losing party may pay the attorney fees. If either party is dissatisfied with the outcome, they are allowed to make an appeal, which can cause the case to carry on for several years. In hindsight, some folks who went through litigation would agree it is best to put a horrific situation behind them and move forward with their lives verses experiencing the heavy cloud of a prolonged lawsuit. Just as with any major decision you might make, you should take the time to consider all aspects to your specific situation. As you can understand with arbitration, the outcome is speedy and although one may not agree with the end result, the ordeal is over. With litigation, you may come out winning the case but have to shell out a lot of cash and emotional stress along the way. I wish you the best in your home buying process. This is an answer to a specific question and is not legal advice. Contact your local real estate attorney for legal advice.