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Mediation & Arbitration Clauses in a Real Estate Contract

By HomeBay

In a real estate transaction, buyers and sellers are sometimes faced with an issue they cannot resolve on their own. Rather than litigate (i.e. go to court), the parties can agree to mediation or arbitration.

mortgage-lender-meeting.jpgThese alternative methods of resolving issues are typically faster and less expensive for both parties, making them preferred options over litigation. The decision to use mediation and arbitration (vs. litigation) is written directly into the Offer to Purchase Real Estate.

Mediation vs. Arbitration

  • In mediation, an independent third party will help both sides to talk through the dispute. If the parties still cannot come to an agreement or resolve the issue, they must arbitrate the issue.
  • In arbitration, the independent third party will settle the dispute. In other words, the arbitrator is judge and jury and makes the final decision on how the issue will be resolved. 

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