Q DEAR BOB: In September, we bought an older house, which had recently been remodeled. Our professional home inspector said the roof, which is flat, appeared to have been repaired recently. During a moderate rain about a month after we moved in, the roof leaked in several spots. When we called the real estate agent and the seller, they both said the roof didn't leak when the house was sold to us so they have no liability. We talked with two roofers who agreed the roof needs to be replaced. One roofer bid $12,500 and the other bid $14,850. When we talked to our attorney, she reviewed our sales contract that says we agreed to "mediate" any dispute that arises with the seller, but if that doesn't work we have to go to binding arbitration. When we signed our purchase offer, the real estate agent strongly "pushed" us to agree to arbitrate any disputes. Is that good or bad? -- Vickie R.
ADEAR VICKIE: Mediation of real estate sales disputes is fine and I highly recommend it as a way to resolve buyer-seller disputes at low expense. When your attorney notifies the seller that you think the house was misrepresented because the roof leaked badly in the first moderate rain after purchase, she will remind the seller of the contract obligation to mediate disputes.
The parties, with the help of their attorneys, will then choose a neutral mediator who has real estate experience. In a simple matter like this, mediation shouldn't take more than one day. Each party presents its evidence, such as your roofer estimates. The parties usually split the fee of the mediator. If he or she is really good, the result will usually be a compromise of some type.
However, if mediation fails, because both buyer and seller agreed to binding arbitration for any sales disputes, then you and the seller will choose an arbitrator who will hear the evidence and render a binding decision. That decision is then presented to the local court for confirmation so it becomes the equivalent of a judgment.
The big drawback of binding arbitration is there is no appeal, even if the arbitrator made a mistake. There is no court trial or jury. The rules of evidence are often loosely applied.
Personally, when I buy or sell real estate, I never agree in the sales contract to binding arbitration of future disputes. My philosophy is that's not the time to give up my legal rights to a jury trial if a dispute later arises. However, should a lawsuit later develop, the parties can then agree to binding arbitration if they desire.