Understanding real estate arbitration

You are likely floating somewhere above Cloud 9 after having found your dream home in St. Louis. Yet suddenly, you have come crashing back down to earth after discovering that the seller put an arbitration clause in the closing contract. Countless clients have come to us here at TDD Attorneys at Law LLC wondering what such clauses mean and whether or not they should sign them. While reading the term “dispute resolution” might give you pause, remember that an arbitration clause is not necessarily an indicator that problems will arise with your home; it simply provides a method of resolving them if they do come up.

The National Association of Realtors defines arbitration as a method of alternative dispute resolution in which the parties involved agree to accept the ruling of a third party arbiter as binding when dealing with a dispute. Say, for example, that shortly after moving into your new home, you discover mold in the basement. Your first thought may be that the seller purposely avoided telling you about it in fear that you knowing would make you not want to buy the house. You contact him or her asking that he or she pay for the remediation, and he or she refuses, saying that you agreed to buy the home “as is.” An arbitration clause would then require you to argue this dispute in front of an arbiter rather than in court.

An arbiter is typically one who has experience in the matter you are disputing. He or she will listen to both sides and then issue a ruling. While proceedings are not held in court, you can have an attorney present to represent you. More information on dealing with legal matters involving real estate transactions can be found here on our site.