Is mediation always necessary in a home purchase dispute? Yes, here’s why
Question: We signed the Realtor purchase contract with the buyer of our Cave Creek home. The buyer deposited with the escrow company $100,000 earnest money. All inspections were fine, and escrow was scheduled to close. Then, before closing, our Realtor said that the buyer decided they wanted to cancel the Realtor purchase contract because our neighborhood is “too noisy.” Unbelievably, the buyer also wants their $100,000 earnest money returned. The escrow company basically told us that it’s not their problem and that they will deposit the $100,000 earnest money with the court in 60 days unless there is a settlement with the buyer. Our Realtor purchase contract requires mediation before we can go to court to try to collect the $100,000. We don’t want to spend the time and money to mediate because it would be a waste of time. We just want to go to trial to get the $100,000 earnest money. Do you agree?
Answer: Absolutely not. The legendary Texas football coach Darrell Royal said, “There are three things that can happen when you throw the ball, and two of them are bad!” Litigation is worse than that: All three things that can happen can be bad. One, you can lose at trial and pay your attorney fees, and frequently pay the other side’s attorney fees. Two, neither party wins or loses at trial (e.g., the jury can’t reach a verdict), and you pay your own attorney’s fees. Three, you can “win” at trial and get a judgment for $100,000, and frequently for your attorney’s fees. You will rarely collect the entire judgment, however, especially if the opposing party leaves the state or files bankruptcy. Further, if you fail to go to mediation as required by the Realtor purchase contract, the judge will consider that failure in awarding attorney fees, whether you win or lose. Finally, in addition to paying attorney fees, there is enormous stress during at least the 2-3 years to go to trial, and then there is the appeal, new trial, etc.
Bottom line: You should go to mediation now with the buyer to settle who is entitled to the $100,000 earnest money. There is no rule of only one mediation, and in the past we have done two, even three, mediations to finally settle a lawsuit.