3 minutes reading time (639 words)

The Problem with Real Estate Contracts

There is a serious problem when buyers and sellers of land use the contract provided by their realtor.

The Oregon Association of Realtors contract provides that in the event of a dispute, the parties will resolve their dispute by mediation and then by binding arbitration. It also provides that if there is a dispute between the real estate agent and the customer, that dispute will be resolved by arbitration also. The contract does not give you a choice in deciding what is the most efficient way to solve a real estate dispute.

Mandatory arbitration provisions are often more desirable than court in large counties where court dockets are so full that a person may have to wait a long time to get a resolution. The downside of the Oregon Association of Realtors contract is that arbitration is mandatory. That may work well for cities with long judicial dockets, but it does not seem to fit Curry County well.

Why is this a problem? There are several reasons why arbitration may not be the best way to go in Curry County.

Curry County dockets are very fast as judicial districts go. With extremely rare exceptions, matters must be resolved by court action or settlement within one year of the date of filing. We have the fastest docket in Oregon, in contrast to large counties where a matter may not come to trial for two or three years. In large counties, it may be more desirable to have an arbitrator because the arbitrator can resolve problems faster than the court docket would allow. In Curry County, this is not the case.

A second problem is that the disputing parties must pay the arbitrator. The rate of pay is usually the normal hourly fee charged by that attorney in the locale where he or she practices. An arbitrator may charge $400.00 an hour to decide a case.

In contrast, our judges have already been paid. Your taxes pay them. And a local judge may have seen your kind of problem arise in previous instances and have experience in resolving your specific kind of case. It makes no sense why people would be willing to pay an arbitrator, when we have a paid arbitrator ready to hand. We call that arbitrator “Your Honor”, and have elected that person to do our arbitration for us. And in Curry County, the docket is about as fast as binding arbitration.

Finally, there is the problem of appeals. No matter how talented or intelligent, arbitrators and judges do make mistakes from time to time. You may believe that an error was made in your case which change the outcome of your case. What can you do about it? The decision in arbitration is binding. There are limits on the rights to appeal. The decision of the trial court can be appealed to a three judge panel in the Court of Appeals in Salem. If they find that the trial court made an error, they can correct it. Appeals in arbitration are very limited.

Arbitration might be a useful and constructive way to resolve a real estate dispute. Its most effective use is in large population counties with very long, slow dockets. In Curry County, dockets are less than a year. The arbitrator has already been paid. And the decision if it is not correct can be appealed.

When you are presented with a Sale Agreement for the sale or purchase of real estate, you might want to consider having the mediation and mandatory arbitration provisions deleted from your contract. You do this by lining through those provisions, and having the parties put their initials in the margin of the deleted section. I have never seen a transaction that fell through because the parties refused to accept the standard arbitration provisions. Eliminating arbitration should not jeopardize the transaction.

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