Arbitration
Definition and meaning of Arbitration in real estate.
Arbitration is a private dispute resolution process where an impartial third party, called an arbitrator, hears arguments and issues a binding decision.
In more detail
Real estate contracts, including purchase agreements and lease contracts, frequently contain mandatory arbitration clauses to resolve disputes outside of the court system. This process is typically faster, more confidential, and less expensive than traditional litigation, which is a formal lawsuit in court. The arbitrator acts as a private judge, reviewing evidence and witness testimony before rendering a final ruling.
In binding arbitration, the parties agree in advance to accept the arbitrator's decision, which can rarely be appealed in court.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Decided by | Neutral third-party arbitrator |
| Legal status | Binding in most real estate contracts |
| Advantage | Faster and less public than a trial |
When the buyer discovered undisclosed foundation defects after closing, the parties resolved the dispute through arbitration rather than filing a lawsuit in court.
Frequently asked questions
Is arbitration the same as mediation?
No, mediation involves a neutral party who helps the disputing parties reach a voluntary agreement, while an arbitrator makes a final, binding decision.
Can I sue in court if my contract has an arbitration clause?
Generally no, if you signed a contract with a valid binding arbitration clause, the court will dismiss the lawsuit and direct the dispute to arbitration.
Who pays for the arbitration process?
The costs of arbitration are typically split equally between the parties, unless the arbitrator rules that one party must cover the entire cost.
Related terms
Sources & references
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