As someone who's been through arbitration over a real estate transaction, I can give you some insight as to the possible procedures. My case was several years ago and in Oregon, so things might be somewhat different in California. This is a little long, so bear with me. :)
I had made a standard offer to purchase an older home in Portland. As with all real estate contracts, the form clearly states that both seller and property must qualify for financing. Well, the roof inspection came back and said the roof needed replacing now. The loan required 3 years of life in the roof. Poof! No deal, right? Wrong! The seller wouldn't negotiate on paying for part of the replacement, so I cancelled the deal and requested my earnest money back. They said no. We ended up in arbitration.
First thing I didn't realize is that attorney's are allowed (not like small claims court). So, I hired an attorney since they had one. Second thing I didn't realize is that the arbitrator's decision is final and there's no appeal. Third thing I didn't realize is that there is no system of checks and balances on arbitrators. They are simply attorneys who are appointed to the role. So, if they make a bonehead decision or take payoffs or anything else, there's no way to bring them up on review.
The upshot is, that the arbitrator took several weeks to make a decision and ultimately decided that not only did I not deserve to get my earnest money back, but I MUST buy the house AND pay the seller's attorney's fees! ARGH! Fortunately, the seller's attorney ended up seeing that this was bogus and we settled it privately. I didn't get all my money back, but I got some of it. My attorney had made a small mistake at one point that really didn't effect things, but to compensate, he didn't charge me. All in all, I was very lucky.
What I learned was NEVER to sign a contract that specifies arbitration as the method of resolving differences. Real estate contracts here in Oregon have since been changed to specify Small Claims Court for these disagreements, thank God.
In any case, don't let them scare you off. Even if you don't take it as far as arbitration (and there are risks in that), definitely complain. As long as it doesn't cost you anything more than time, it's worth it. If several investors a week walk away from this kind of thing, Alex Brown makes quite a nice profit at our expense!
Let us know what happens. |
