Photograph by Jean Newton

D. Kent Westerberg (right) a Saratoga-based attorney, discusses mediation issues with Ron Gates, a mediator and member of the board of directors of the Silicon Valley Association of Realtors. Gates is also a broker with Ridge properties of Los Gatos.

Mediation often a better avenue for disputes

By Jean Newton

When there is a dispute between a buyer and a seller in a real estate transaction, there is an alternative to a lengthy trial and costly legal fees by using mediation and arbitration services through the Silicon Valley Association of Realtors.

Ron Gates, a member of the association's board of directors, believes mediation produces very successful results in resolving disputes. "It's a good system and it works. Personally, I've seen an overall rate of success of about 80 to 90 percent of disputes resolved in mediation instead of going to the courts," said Gates, a broker with Ridge Properties in Los Gatos who also serves as a mediator, expert witness and litigation consultant on real estate matters.

Mediation is an informal process that brings disputing parties together with a neutral person, the mediator, to negotiate their differences. The mediator facilitates communication and problem-solving and assists the parties in reaching a mutually agreeable settlement of the dispute. Mediation is non-binding since the mediator does not render decisions or impose sanctions. The mediator does not give legal or financial advice, and mediation is a confidential process in which any admission or written agreement made during the process cannot be used in any other forum.

Arbitration is a more formal process than mediation. An arbitrator listens to evidence presented by both parties and has the authority to render a binding decision similar to a judge in a court of law. The parties involved forfeit their right to have their dispute tried in a court of law. This differs from the mediation process, since the mediator has no authority to render a decision but assists the disputing parties in finding a mutually agreeable solution. If no agreement can be reached during mediation, the parties are still free to pursue other forms of dispute resolution, including arbitration and litigation. The arbitration process can be described as an informal trial with no appeal.

Most buyers and sellers sign contracts that include a mediation clause, which states the parties must try mediation before filing a lawsuit or arbitration or they may lose attorney's fees. The cost of mediation is relatively inexpensive compared to the costs of the other two choices. The Silicon Valley Association of Realtors offers a three-hour mediation for $800, with additional fees for longer sessions. There is also a $100 fee required with the Request for Mediation Services form.

Attorney Kent Westerberg, who serves as an advisor to the Silicon Valley Association of Realtors, said, "Mediation absolutely works and fees are cheaper than going to trial. Residential real estate calls out for mediation. The majority of cases are settled before going to court and there is a risk that you won't recover attorney's fees if you choose arbitration as an alternative. Cases usually get resolved unless there are legal issues or factual disputes over the transaction that require arbitration or a trial."

A specialist in real estate law, Westerberg said many real estate cases are the result of disclosure issues. "It's rare to see an intentional non-disclosure case. There are fewer cases with agents at fault. I see this diminishing because people are becoming more educated about what needs to be disclosed. "

Both buyers and sellers sign disclosure statements that spell out items to be disclosed, and there is a checklist available for sellers that also helps define disclosure items. Westerberg cited as examples some recent cases, including a neighborhood noise issue and a dispute over the difference of 125 feet in the size of the square footage of a house. "Anything that could affect the value or desirability of a property needs to be disclosed," he said.

The number of disputes reaching the mediation process can actually reflect the conditions of the marketplace, said Westerberg, who cited the dot-com boom and bust as an example. The potential for disputes increased in the era of multiple offers where people moved into homes in a hurry, often without inspections, and perhaps paid more than they should have for a home.

"Sometimes when people by a house as is, they get buyer's remorse after moving in, so it's hard to prove a nondisclosure might have been intentional," said Westerberg. "Mediation can help find a solution. I tell everybody to make the effort in mediation to get results. If people don't settle in mediation, the minute the parties walk out the door the dollar amount in dispute starts to go up."

Westerberg stresses the importance of using a designated Realtor in real estate transactions as a good hedge against problems that could arise. When people who are trying to make a transaction on their own ask him to look at real estate contracts, he encourages them to reconsider going it alone.

"I'm a lawyer, not a real estate agent. While I can handle the contract aspect, it is still important to get a Realtor involved for a myriad of other items in the transaction, such as loans or termite inspections. It's the best thing you can do and it's definitely worth the investment in cost when you are making the biggest investment in your life," said Westerberg.

In addition to mediation and arbitration, the Silicon Valley Association of Realtors provides professional conduct services to enforce the Realtor code of ethics.

Agents who belong to the association and hold the designation of "Realtor" prescribe to a code of ethics that is upheld through professional standards hearings. Ron Gates, former chairman of the association's Professional Standards Committee, believes the process is important in preserving the professionalism of Realtors.

"We want to defend our image as professionals who adhere to strict ethical standards. This process allows us to keep our professional standards high," said Gates. "The public should feel comfortable knowing these programs are available and at an affordable price."

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For more information about Silicon Valley Association of Realtors mediation and arbitration services, check out its website at www.siliconvalley-realtors.org.

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