Disputes: Arbitration or Court?

Dear Pat,
We recently made an offer on a house. One of the forms in the purchase agreement required us to make a decision about signing up for arbitration. Our agent said it was a good idea, so we signed, but now we're not so sure we should have What do you think? I think we should have asked . . .
--More Questions

Dear Questions,

Here's an answer that should make you feel tons better: you definitely, probably, or possibly made the right decision. First, a brief explanation of arbitration: it's an alternative to the courts as a way to settle disputes between buyers and sellers concerning physical problems in the house. A single arbitrator is most often used, but with party for an extra cost may choose a 3-member panel. A request for arbitration must be made within 2 years of the sale date. Administrative cost is $450, to be paid when the claim is filed. The hearing is usually held at the property site; either party may have an attorney present; and the arbitrator's aware must be made within 30 days. For detailed look at the process, go to www.cas-usa.org, the website of Construction Arbitration Services, the company that administers the program for Minnesota Association of Realtors.

Both buyer and seller must agree to use arbitration by signing the appropriate agreement on the the purchase contract. If the buyer signs but the seller refuses, then the buyer will have to use the much more cumbersome (and often much more expensive) courtroom process to redress future grievances. Yet, if the seller signs he/she is agreeing that arbitration shall be the buyer's only recourse; that the buyer has only two years to make a claim, and that the arbitrator's aware shall be binding, with virtually no possibility of appear. (Beware the arbitrary arbitrator.) Seems to cut both ways, doesn't it?

So which to choose, the easier-to-use arbitration system--or the cumbersome, but relatively limitless, umbrella of the justice system? I used to recommend that my clients decline arbitration; because, in theory at least, the courts system offers more flexibility. In the past few years, however, I've become aware of many situations where arbitration might be a more practical choice.

So since I can't really answer your question, Questions, I'll leave you with an actual comforting thought: my own experience working with over a thousand clients through the years has resulted in no arbitration hearings; I've only had one client use reconciliation court. Certainly there have been problems that showed up after the sale, but the sellers, buyers, and agents involved have always been able to reach a satisfactory settlement outside the system. I say this not to toot my own horn--in fact, I'm sure many professional Realtors can make a similar statement--but to not that, in the real world, most sellers and buyers are simply reasonable people who want to do the right thing.