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Mediation in real estate disputes

Demystifying Mediation in Real Estate Disputes

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While clients typically do not go under contract anticipating a dispute, it is an unfortunate reality that sometimes even the best deals can turn sour. Part of being an effective realtor includes being able to provide key information to a client about dispute resolution. Pursuant to section 16 of either version of the FAR/BAR Residential Contracts, if a dispute should arise, the parties have an obligation to attend mediation in real estate disputes to attempt to resolve the dispute before pursuing litigation. Mediation can seem daunting to clients and realtors alike, and this blog post seeks to demystify the mediation process.

What is Mediation?

Mediation is an informal dispute resolution process whereby a neutral third person, the mediator, assists parties in resolving the dispute between them. Licensed attorneys, who review the facts and legal arguments of each party and often provide their independent assessment of the dispute, mediate the process. In the mediation process, each party presents their case, the parties separate, and the mediator conveys offers and counter-offers until either the parties agree on settlement terms or they decide that a settlement is not possible. Mediations are confidential, and information discussed at mediation cannot be brought in as evidence if the parties file suit.

Who Has the Right to Demand Mediation in Real Estate Disputes?

Both the seller and the buyer have the right to demand mediation in real estate disputes. Before filing a lawsuit over a dispute, the seller and buyer must make an attempt to mediate the issue. Failure to request mediation can lead to the dismissal of a lawsuit, so it is imperative that parties seeking to enforce the terms of the real estate contract propound a demand for mediation before filing suit.

Are there Costs Associated with Mediation?

Yes! Typically, mediators charge an hourly fee that can vary depending on the mediator. While the parties equally split the mediator fees, it is common for parties to spend upwards of $500-$1,000.00 on mediator fees alone (if not more). Additionally, the mediation expense will likely incur additional fees if the parties wish to retain an attorney. These fees are not recoverable as the contracts require the parties to bear their own costs to attend mediation. Because of this, mediation fees can exceed the amount in dispute, especially for more minor deposit disputes. It often makes sense for the parties to attempt to resolve small claims on their own to avoid the expense of mediation.

If your clients have questions regarding mediation in real estate disputes or require representation for mediation, we recommend that your client consult a litigation attorney for further information.  

Brad Spivey, Esq.

Brad Spivey, Esq.

Brad Spivey has been practicing as a litigation attorney since 2019 and handled a wide range of client matters, including complex business litigation, landlord-tenant disputes, contract disputes, insurance disputes, and personal injury litigation.

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