You are wading through the plethora of documents associated with buying and selling a home. Offers, home disclosures, purchase agreements, etc. One of those documents catches your eye: the Arbitration Disclosure and Residential Real Property Arbitration Agreement. What is this and what does it mean? You were right to stop and think. This document has a significant effect on your legal rights should problems arise with the home after the sale.  

In most residential real estate transactions, sellers are required to make certain disclosures to buyers about the condition of the property. Unless a Purchase Agreement is drafted to provide otherwise, a buyer has the right to bring legal action against a seller if the seller failed to disclose material facts affecting the use and enjoyment of the property. The Arbitration Disclosure and Residential Real Property Arbitration Agreement determines the forum for where this legal action takes place. The choices are arbitration or district court (or small claims court in certain situations).  

Arbitration is a private resolution system offered as an alternative to the court system that uses attorneys as the “judge” in your dispute, and the district court is your standard judge and courthouse arrangement familiarized by Law and Order (minus the scripted theatrics). The decision to sign the Arbitration Disclosure is personal to each individual. It can be declined by either party. Both parties and their agents are required to sign the Arbitration Disclosure to make it binding.   

The benefits of arbitration are commonly described as 1) faster resolutions of disputes, 2) less spent on attorney fees, and 3) having factfinders with extensive knowledge about nondisclosure litigation. The detriments of arbitration are commonly described as 1) limited rights of appeal, 2) limiting most of your claims to a 24-month window, 3) limited discovery, 4) and a larger filing fee to initiate a claim.   Should you sign the Arbitration Disclosure? That’s a question for you and your attorney to decide. We recommend reading the document carefully and asking your attorney any relevant questions you may have. Sanford, Pierson, Thone & Strean’s attorneys have represented buyers and sellers in many real estate nondisclosure disputes and in real estate arbitrations. We are here to help if you have any questions.