Most real estate transactions close escrow relatively smoothly and involve happy clients. But if you work in this industry long enough, sooner or later you will encounter a buyer/seller dispute. Common disputes include non-disclosure and misrepresentation claims regarding the property’s condition. Other common disputes include claims for specific performance, or general breach of contract claims.
Litigating real estate disputes can be expensive and time consuming. In fact, resolving claims through the courts can take anywhere from several months to two years and cost tens of thousands of dollars.
Fortunately, the Arizona of Association of REALTORS® (“AAR”) created a solution to help parties efficiently resolve any dispute arising out of the standard AAR Purchase Contract and avoid litigation (in most cases).
Indeed, Section 7(c) of the AAR Residential Resale Real Estate Purchase Contract requires that the parties submit their disputes to mediation before filing a lawsuit. According to AAR, parties have successfully settled a majority of the cases submitted to AAR for mediation from 2012 – 2015. The remainder of this article discusses how to increase your odds of a successful resolution at mediation.
Mediation is defined as “a non-adversarial process that brings disputing parties together with a neutral, unbiased third party (mediator) who assists the parties in reaching a mutually agreeable settlement of the dispute.” BLACKS LAW DICTIONARY (8TH ed. 2009).
Unlike litigation, the mediation process, including any settlement offer presented at mediation, is confidential pursuant to Rule 408, FEDERAL RULES OF EVIDENCE.
Mediation has many other advantages over litigation. First, mediation is a much quicker process – parties can get their case resolved at mediation in less than one month. On the other hand, it typically takes anywhere from six months to two years to obtain resolution through the courts.
Second, mediation is much less expensive than litigation, partially because it is much quicker. Third, mediation leads to more amicable results because the parties get to create their own mutually agreeable outcome.
Importantly, if the parties agree to submit their dispute to mediation, they do not forfeit their right to go to court regarding any claims that do not get resolved at mediation.
Here are three tips on how to increase your odds of successfully resolving real estate disputes at mediation.
Prior to the scheduled mediation date, be sure that you are well prepared. Depending on the amount in dispute, hire a real estate attorney to help present your case at mediation. Collect and organize all relevant evidence that you would present at trial, including the relevant transaction documents, emails, text messages, etc. Next, obtain the documents that will prove your damages, such as invoices, receipts, appraisals, bids, etc. Finally, once you have collected all relevant evidence, prepare a written summary of your claims and a summary of your evidence and exchange this information with the opposing party prior to mediation. You generally do not want to surprise the opposing party the day of mediation with new evidence or new damages calculations. Instead, you want the other side to be fully aware of how strong your case is before the mediation even begins. Further, the claimant should provide the other party with a written settlement demand prior to mediation to help manage expectations at mediation.
Timing is Key
As mentioned above, the parties do not forfeit their right to file their claims in court if the case does not settle at mediation. And mediation is confidential. So there really is no downside to participating at mediation, other than possibly mediation and attorneys’ fees. And if the case does not settle at mediation on the first try, the parties can always reschedule a follow-up mediation and try again.
In my experience, the few cases that do not settle at mediation fail to settle because the parties simply were not ready to be there. The timing was not right. Picking the perfect time to mediate a case requires a balance of two competing interests: on the one hand, the parties want to get to mediation right away to minimize attorneys’ fees and to put the dispute behind them. On the other hand, the parties want to be as prepared as possible and collect as much evidence as they can to support their claims and defenses. Unfortunately, it sometimes takes a bit of time to collect the relevant evidence. The goal, of course, is to be as prepared as possible the day of mediation without spending a fortune to get there.
Hire the Right Mediator
Just like in any profession, some are better than others depending on the circumstances. But at a minimum, the mediator should have:
- legal training;
- real estate knowledge; and
- real estate mediation experience.
You can find a list of AAR approved mediators here.
Most real estate disputes end up at mediation at some point. The AAR Purchase Contract requires mediation and the courts require that the parties participate in some form of alternative dispute resolution (such as mediation) before the court will set the case for trial. Mediation has important advantages over litigation and an overwhelming majority of cases submitted to mediation get resolved. If the parties follow the above steps, they will increase their chances of resolving their case at mediation and can avoid taking their dispute through a long, expensive trial.
I serve as a private Mediator and Arbitrator for AAR. If you or someone you know has questions regarding Mediation or Arbitration, please call today to speak with me.