Real Estate Mediation: Problem? Work It Out.
Mediation opens the door to resolving some real estate contract disputes. Here's a look at how it works — and how can help you.
Congratulations, the offer has been accepted! It’s the perfect deal. Everything is moving along smoothly. Then, a few weeks before the closing, things begin to unravel.
The appraisal came back $32,000 below the purchase price. The executed purchase agreement included an appraisal gap addendum whereas the buyer would only pay $10,000 above the appraisal valuation. The sellers refused to accept the lower valuation of the home and want the full contracted purchase price. Everyone is angry, and the buyers are threatening legal action.
Unfortunately, in today’s society, litigation is the first reaction to resolve real estate disputes. Real estate disputes can include earnest money deposits, home inspections, misrepresentations about the condition of the property, plumbing or electrical problems, roof leaks, moving dates, breach of real estate contracts, appliances or fixtures disputes, breach of fiduciary duties, fraud, personal property, property encroachments, costs for unexpected repairs, and the list goes on.
Often the disputing parties’ emotions are high, and they want their day in court. The parties seldom have the opportunity to speak informally to each other. All parties generally assume they have a strong case, and the judge or jury will rule in their favor. However, no case, no matter how strong, has a guarantee of success in your favor.
Mediation is the preferred dispute resolution method
What can a Realtor® do to help alleviate a lengthy, costly, stressful litigation leading to a courtroom trial decision? Section 16(b) of the Florida Realtors/Florida Bar “AS IS” Residential Contract for Sale and Purchase states: “Buyer and Seller shall attempt to settle Disputes in an amicable manner through Mediation. … The Mediator must be certified or must have experience in the real estate industry.” According to the National Association of Realtors® (NAR), mediation is the preferred method of dispute resolution.
Mediation can and should be the first step to resolve a real estate dispute and can be initiated at any time by agreement between the disputing parties on the selection of a real estate mediator. The issues in the dispute are self-determined by the disputing parties and not decided by a judge or jury. Your attendance at the mediation does not imply any admission of guilt or wrongdoing. Mediation is a voluntary, confidential, non-adversarial way for people to come together and discuss their issues and concerns with a neutral and impartial mediator.
What Is mediation?
The mediator is there to facilitate discussion between the disputing parties and gives them the opportunity to explore opportunities for a mutually agreeable resolution. The mediator is restricted from giving legal advice to all parties involved, and representation by an attorney is highly recommended, but not required.
How it works
- The mediation begins with all parties giving opening statements. This allows each party the opportunity to speak and give their facts and key arguments so everyone understands the strengths and weaknesses of the dispute. The parties may never convince the other side that they are wrong, but this understanding will possibly help convince both sides that a compromise is necessary.
- After opening statements by all parties, the mediator may separate each side into a private meeting referred to as a caucus. Each caucus has a private discussion about the case and how best to move toward a resolution. Information discussed during caucus may not be disclosed by the mediator to any member of the opposing party without the consent of the disclosing party. There is no restriction on the amount of time the mediator spends with each party during caucus and should not be considered showing favoritism of one party over another. The mediator will move from one caucus to the other discussing opportunities for a settlement.
- Offers and counteroffers are presented. There will be offers and counteroffers until a possible mutually agreed settlement is achieved. Occasionally an agreement cannot be reached during mediation, and the parties may institute action in the courtroom.
- If a resolution is obtained during mediation, an agreement is put in writing and signed by all parties. The written agreement becomes a legally binding document and is enforceable by the courts.
Mediation can be a win-win resolution for all parties involved in a real estate dispute. Mediation can expedite the resolution process and save your clients valuable time and money. Plus, it is a more cost-effective alternative to litigation. #
John R. Mayhew is a Florida Supreme Court Certified Circuit and County Mediator specializing in real estate mediation. He is also a licensed Realtor® with over 30 years of experience in the real estate industry.