Real Estate Glossary

What is Arbitration?

Understanding Arbitration

In the world of real estate, disputes can arise between buyers and sellers, landlords and tenants, and even between real estate professionals. When these disputes can't be resolved through negotiation or mediation, they may need to be taken to arbitration.

Arbitration is a legal process where a neutral third party, called an arbitrator, hears both sides of the dispute and makes a binding decision. It's similar to a court trial, but it's usually faster, less formal, and less expensive.

In an arbitration hearing, both sides present evidence and arguments to the arbitrator, who then makes a decision that's final and binding. Unlike mediation, where the parties work together to come to a mutually agreeable solution, in arbitration the decision is made by the arbitrator.

Why Arbitration is Used in Real Estate

Arbitration is often used in real estate because it can be a faster and less expensive way to resolve disputes than going to court. It also allows the parties to have more control over the process, since they can choose the arbitrator and agree on the rules of the hearing.

Real estate disputes that may be resolved through arbitration include:

  • Contract disputes between buyers and sellers, such as disagreements over the purchase price, financing, or contingencies.
  • Disputes between landlords and tenants, such as claims of breach of lease or failure to make repairs.
  • Disputes between real estate agents or brokers, such as commission disputes or allegations of unethical behavior.

Overall, arbitration is a useful tool for resolving real estate disputes when negotiation or mediation are not successful. It allows the parties to have a fair and impartial decision made by a neutral third party, without the cost and time involved in a traditional court trial.