Home Sale Gone Wrong? Choose Your Battle Plan Wisely

: Richard Montgomery on Jan 28, 2025

Dear Monty: We have an issue with a home seller on a home we recently purchased and have been researching three different methods to engage. Please describe each method and then share its advantages and disadvantages. The methods are litigation, arbitration and mediation.

Monty's Answer: When we are at the point of moving forward in the process, we are focused on the listing or purchase and do not consider a problem arising after a contract is in place. If, after attempting to work the issue out between you or it seems implausible, here is an overview of the methods:

Litigation is the traditional court-based legal process where parties present their case before a judge or jury. The process follows formal rules of evidence and procedure, with attorneys typically representing each side. The judge or jury makes a binding decision based on the evidence and legal arguments presented.

Pros of litigation:

-- Provides the most comprehensive legal protections and rights of appeal

-- Creates legal precedent that may benefit others in similar situations

-- Offers broad discovery powers to obtain evidence from the opposing party

-- Gives the court contempt powers and the ability to enforce judgment

-- Is the best option for complex cases involving multiple parties or issues

Cons of litigation:

-- Is usually the most expensive option due to attorney fees and court costs

-- Can take many months or even years to reach a resolution

-- Makes the process public, with court records available to anyone

-- Can create highly adversarial nature which often destroys any remaining goodwill between parties

-- Means there is less control over the outcome as the decision rests with the judge or jury

Arbitration is a private process in which a dispute is submitted to one or more impartial arbitrators who make a binding decision. Attorneys handle arbitrations.

Pros of arbitration:

-- Is generally faster and less expensive than litigation

-- Makes proceedings private and confidential

-- Allows parties to select attorneys with relevant expertise

-- Has more flexible scheduling than court proceedings

--Requires fewer formal rules of evidence and procedure

Cons of arbitration:

-- Affords very limited rights of appeal, even if the arbitrator makes a mistake

-- Can still be expensive due to fees and attorney costs

-- May lack full discovery powers of litigation

-- Encourages arbitrators to tend toward compromise decisions

-- Means parties give up the right to court trial due to binding nature

Mediation is a voluntary process where a neutral mediator helps parties negotiate their settlement. The mediator has no power to impose a decision; their role is to facilitate communication and help parties find common ground.

Pros of mediation:

-- Is usually the least expensive option

-- Is often the fastest path to resolution if the parties cooperate

-- Allows creative solutions beyond monetary compensation

-- Preserves relationships better than adversarial processes

-- Parties maintain control over the outcome

-- Creates confidential process

-- Means parties can still pursue litigation if mediation fails

Cons of mediation:

-- Requires voluntary cooperation from both parties

-- Is no guaranteed resolution if parties can't agree

-- Has limited ability to compel information disclosure

-- Lacks the finality of a court judgment or arbitration award

Given these characteristics, mediation is often the best first step due to its low cost and potential for quick resolution. If mediation fails, parties can consider arbitration or litigation based on case complexity, desired precedent and cost sensitivity. If your desired choice is not in the proposed contract, you can negotiate your choice before you agree to the contract.

Richard Montgomery is a syndicated columnist, published author, retired real estate executive, serial entrepreneur and the founder of DearMonty.com and PropBox, Inc. He provides consumers with options to real estate issues. Follow him on Twitter (X) @montgomRM or DearMonty.com.

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