⚖️ What Is a Mediation / Arbitration Clause in Real Estate?

A Mediation / Arbitration Clause in real estate defines how disputes between the buyer and seller must be resolved without going to court. It requires the parties to first attempt mediation, and if unresolved, proceed to binding arbitration to settle the issue privately and efficiently.

How a Mediation / Arbitration Clause Works

This clause outlines the step-by-step process for handling disputes when the buyer and seller cannot agree. Rather than filing a lawsuit, the parties must settle disagreements through structured alternative dispute resolution (ADR) methods.

Typical components of a Mediation / Arbitration Clause include:

  • Mediation requirement — parties meet with a neutral mediator to negotiate a resolution.
  • Arbitration process — if mediation fails, a neutral arbitrator hears the case and issues a binding decision.
  • Costs & fees — often shared, unless the arbitrator rules otherwise.
  • Timeline for initiating mediation after a dispute arises.
  • Restrictions on lawsuits — court filings are usually not allowed until ADR is completed.

These clauses ensure disputes are resolved faster, privately, and with fewer legal costs than traditional litigation.

Why a Mediation / Arbitration Clause Matters

Benefits for Buyers:

  • Avoids costly court battles.
  • Helps resolve disputes quickly.
  • Keeps personal information confidential.
  • Provides a fair, structured dispute process.

Benefits for Sellers:

  • Reduces the risk of lawsuits.
  • Prevents long delays caused by court schedules.
  • Ensures disputes are handled by trained neutrals.
  • Offers predictable outcomes and faster resolutions.

Example of a Mediation / Arbitration Clause

A typical clause might state:

  • “Buyer and Seller agree that any dispute arising from this contract shall first be submitted to mediation conducted by a mutually agreed-upon mediator.”
  • “If mediation is unsuccessful, the parties agree to binding arbitration administered by a recognized arbitration service.”
  • “The arbitrator’s decision shall be final, and judgment may be entered in any court with jurisdiction.”

This ensures both parties follow a clear dispute-resolution path before considering legal action.

Why It Matters for FSBO Sellers

FSBO sellers often lack legal representation during negotiations. A mediation / arbitration clause provides protection and structure if a dispute arises.

  • Helps avoid emotional disagreements escalating into lawsuits.
  • Ensures disputes are resolved quickly and fairly.
  • Reduces legal expenses significantly.
  • Offers a clear process for disagreements over inspections, deposits, and repairs.

When listing with Flat Fee MLS through Brokerless, sellers can ensure their contract includes strong dispute-resolution protections.

Frequently Asked Questions

Is mediation required before arbitration?
Yes. Most clauses require mediation first, then arbitration if the dispute remains unresolved.

Is arbitration legally binding?
Yes. The arbitrator’s decision is final and enforceable in court.

Can I still sue if I sign a mediation / arbitration clause?
In most cases, no. Lawsuits are restricted unless arbitration rules allow appeals in very limited situations.

What disputes does this clause cover?
Common disputes include repairs, inspection issues, earnest money arguments, deadlines, and contract performance.