Commentary

Real Estate

Ways to resolve conflicts

John M. Lee

 

In the practice of real estate, conflicts and negotiation between

buyers and sellers are commonplace. But what happens when an agreement cannot be

reached and neither side is willing to compromise? Then we have to go to the next step

beyond negotiations and go outside of the interested parties for conflict resolution.

 

There are basically three avenues to turn to and they are usually agreed upon when the

buyers and sellers execute a purchase agreement. Thus, it is important to know your

options before signing a contract.

 

Mediation is usually the first option and most real estate contracts dictate that the

parties go through mediation prior to any other method of conflict resolution.

 

An attorney, retired judge or someone who is well versed in resolving complicated issues

usually holds the mediation proceedings.

 

Typically, the buyers, sellers and/or their attorneys gather in an office. Each presents

the facts of the case, their positions, and a proposed course of action or settlement.

Then, the mediator usually probes by asking more questions, clarifying the positions of

the parties, and tries to force an agreement through negotiation.

 

This might entail the parties going to separate rooms with the mediator going back and

forth presenting each side’s positions and playing the devil’s advocate.

He might propose alternate solutions, or present different scenarios if the situation were

to deteriorate further. He might use numbers and dollars and cents to

cause both sides to bend and, hopefully, at the end of the mediation both sides will have

agreed to some type of settlement or agreement that they can live with.

 

However, the mediator does not have any power to force a settlement or any action by

either party. Thus, if one party refuses to negotiate or feels that it is not in their best

interest, they can refuse all of the proposals. When the mediator feels that nothing can

be achieved, he or she will recommend that  the parties proceed to the next step – either

arbitration or a court of law.

 

Arbitration is different in that the arbitrator has the power to rule on the case, with no

possibility of appeals by the parties. Again, both buyers and sellers, along with their

attorneys, appear before the arbitrator to present their case. The arbitrator

can question the parties, and the attorneys can question the plaintiff and defendant.

 

Each party can bring in material evidence, correspondence or witnesses.

Based on the facts, the arbitrator will render a decision that both

parties must adhere to.

 

The last method of conflict resolution is through a court of law. If the claim is $10,000 or

less, it goes through the Small Claims Court, where the parties usually present their case

before a judge, who rules on his or her findings.

 

If the claim is greater than $10,000, then it must go through

a higher court. And with trials, it can be with a judge or before a

jury. All of the laws of discovery are in effect. Witnesses can be

summoned, testimonies and depositions taken, expert witnesses called upon, and

everything you have seen in the movies can take place.

 

Needless to say, this is a very expensive process with the parties paying for attorney fees,

court fees, expert witnesses and other legal expenses. Unless the claims are huge or the

personalities of the parties are such that they will not settle, most real estate

conflicts do not escalate to this point. The good mediators can use the high legal costs to

create concern and usually force a settlement.

 

In the end, most decisions are made not based on who is right or who is wrong, but on

an economic basis of how much it would cost to pursue the claim further, and what the

economic risk would be. Going through this process, no matter if it is mediation,

arbitration or a court of law, is not fun. It can have a monetary as well as an emotional

toll on all parties involved. Therefore, if possible, negotiate out the differences and

exhaust all means prior to initiating legal proceedings.

 

John M. Lee is a broker at Pacific Union and specializes in the Richmond and

Sunset districts. For real estate questions, call him at (415) 447-6231 or email

johnlee@isellsf.com.

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