Should Buyers and Sellers Waive Arbitration? Hopefully, It’s a Moot Point
[Editor’s Note: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced. If you need legal advice, please consult an attorney.]
Unbeknownst to most home buyers and sellers, modern residential real estate deals — at least in Minnesota — have three, separate arbitration provisions:
One. Between the Buyer and Seller.
Two. Between the Buyer or Seller, and their agent (more accurately, the agent’s Broker).
Three. Between the Buyer or Seller and their title company.
Arbitration vs. Litigation
Normally, however, when people think about arbitration in the context of residential real estate, they’re usually referring to the first type.
At least in Minnesota, if both Buyers and Sellers agree, any post-closing disputes will be submitted to binding arbitration rather than litigated by attorneys (the parties may also seek redress in small claims court — also known as conciliation court).
My standard counsel to clients: whether to waive arbitration or not is usually a moot point, if both parties do what they’re supposed to.
Ounce of Prevention
For Sellers, that means disclosing everything they know about their home (the relevant standard: not what they think is relevant, but what a reasonable Buyer thinks is).
For Buyers, it means hiring a qualified home inspector; following up on any HVAC, roof, or foundation issues (if there are yellow flags); and having both radon levels and the main sewer connection to the home checked out.
P.S.: In my experience, arbitration is most commonly waived when one of the parties is an attorney — or closely related to one.
See also, “The TOO-Clean Seller’s Disclosure“; The “What-Will-the-Neighbors-Tell-the-New-Owner?’ Disclosure Test”; and “The TOO-Conscientious Minnesota Home Seller.”
