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What Do You Need to Understand about Mandatory Arbitration Clause in a Real Estate Contract?

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With the boom in real estate, mandatory arbitration to resolve the disputes has become very common in real estate transactions. Arbitration is a widely used method to settle the dispute out of the court. There are certain advantages in this method of conflict resolution that the court does not offer, such as, it is private and resolve the dispute efficiently and timely. Arbitrations are a cheaper alternative to dispute resolution as opposed to the full court trial.

While opting for arbitration to resolve the dispute, the parties must give due attention to the language of the clauses. If the language is vague, many unfavorable consequences can arise.

Legal Disputes in Real Estate Transactions

While signing a real estate contract, there may arise disputes for many reasons. The buyer may think that the seller has kept a few aspects of the sale hidden, and did not provide complete information about the property and its condition. Thus, the buyer may have stepped back after signing the contract.

The Lawsuit in Real Estate Disputes

In a legal dispute, the parties may consider filing a lawsuit. The process of lawsuit involves hiring a real estate lawyer, who seeks the solution that the party wants. When a lawsuit is filed, the party has to pay to serve the other party. After that, discovery is conducted which involves the parties send questions or put forward their demands.

Litigation is very expensive. The parties involved in the disputes have to pay attorney fees. When an expert witness is necessary, the party presenting the expert must pay him or her.  Moreover, because of a number of pending cases, it can take a lot of time until the judge will hear the case. When the hearing of the case is completed, the verdict is made. But, either of the party can appeal the decision which makes the procedure more expensive as well as longer.

Arbitration is an Alternative to Dispute Resolution

Because of a number of disadvantages of litigation, arbitration is considered as an effective alternative to resolving the dispute. This is less expensive and quicker in finding the solution than litigation. In this process, an arbitrator is appointed instead of a judge to make a decision. Another reason why arbitration is preferable is that the parties can choose the arbitrator who has the background and knowledge of real estate transaction. An arbitrator is not a random decision-maker.

Moreover, in the case of binding arbitration, appeals are not made generally and the finality of the decision is greater than litigation.


Apart from the advantages, arbitration has some disadvantages too. In arbitration, the parties have to agree to the decision and hence, they waive their right to a jury trial.

Since the arbitration is supposed to be cheaper and faster, there are certain shortcuts during the process. Such as, discovery can be limited, meaning that the parties will not have a bigger opportunity to gain information and evidence from another party as it would be in litigation.

Apart from it, the right to appeal may also be limited to only a few situations when fraud is involved. In the results of arbitration that you don’t like, you may end up with very limited resources. You can have arguments to appeal a decision in litigation, for instance, you can argue against an improper ruling on an evidentiary issue. On the other hand, in arbitration, these mistakes will not be sufficient to permit a party file an appeal.

Mandatory Arbitration as Part of the Agreement:

Mandatory arbitration becomes a part of the agreement when a party signs it. In case a party refuses to sign the arbitration agreement, despite that the transaction is completed, and a dispute arises, arbitration can be suggested by one of the parties. The court prefers this method because this way, they remove one case on their side.

In this situation, a real estate attorney can guide well about whether signing the arbitration agreement is in your favor or not.

Steps Included in a Real Estate Transaction

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We here it all the time but aren’t too sure what exactly goes on in a real estate transaction. Especially if you’re shopping for your first home, you’ll definitely want to at least have a basic idea of what the process entails. It can be pretty lengthy, depending on how set you and the seller are in your ways.


Check out the following steps when closing a real estate transaction to avoid getting stuck with an unfair deal.

But here you can get a basic idea of what to expect during the real estate closing process, starting with your offer until after you walk away with the keys.

1. Opening the Escrow

The definition of escrow is an account held by a third party on behalf of two main parties held in a transaction. As you may already be aware, there are lot of details involved in a real estate transaction, and the best way to prevent the deal from becoming unfair on either ends is to have a third party have the money and documents stored until everything is settled.

2. Title Search and Insurance

A title search and title insurance ensure that when you buy a property, nobody else can try to claim it as theirs in the future. The thief could be a revengeful relative that was not included in a will or a tax collector that was never paid.

In this phase, a title office will conduct a title search to make sure that the title is available. If there are any third parties claiming ownership, these issues will be resolved before the ownership of the property is transferred.

3. Find a Real Estate Attorney

It’s highly recommended to work with a real estate attorney in order to get a professional, legal opinion on your closing documents. It’s not common for homeowners to understand each details within them, but an attorney will know exactly what to look for and inform you of any potential problems you may face.

4. Pre-Approval for a Mortgage

It’s not required to close a deal, but getting pre-approved for a mortgage can help you to close it faster, as it shows that you are financially fit to own the property. This can also give you additional bargaining power as well as being offered a rate lock from specific vendors, meaning securing your interest rate for the loan.

5. Negotiate the Closing Costs

While the escrow (the party holding the papers and money) doesn’t provide their service for free, some even charge ridiculous fees to take advantage of consumer’s ignorance. What some consider a junk fee is debatable, but you should look in the details for appraisal review fees, email fees, processing fees, settlement fees, administrative fees, or application review fees.

If you’re willing to put up a fight, you might be able to get some of them waived or reduced. Just keep in mind that legitimate fees can also be inflated.

6. Get the Home Inspection Approval

A home inspection is not always needed, but it’s definitely a good idea to ask for one. At any time you find a problem during the inspection, you have the opportunity to back out of the deal. It’s up to them to either fix it themselves, pay someone to have it fixed, or reimburse you for having it fixed.

7. Get a Pest Inspection

A pest inspection is not covered during the home inspection. You’ll want to make sure that a professional examines each part of the home to ensure that there isn’t a problem. Even a small infestation of termites or ants can lead to a disaster in the future.

Termites can be removed, but make sure it’s done at a reasonable cost before completing the purchase of the home. In fact, if you were already pre-approved for a mortgage, the mortgage company will require that the problem be fixed before you close the deal.

8. Renegotiate the Offer

Even if the seller has already accepted your offer, it’s a good idea to consider renegotiating if the inspector finds any problems. This way, a lower cost of the house can cover the cost of repairs you will need to make. Or, you can keep the purchase price but require that the repairs must be paid for by the seller.

But if the contract already states that you will be buying the property “as is,” there’s not much power you will have in this situation. Just keep in mind that you still hold the power to back out without any penalty if the inspector did find a major problem with the property and the seller won’t fix it.

9. Secure the Interest Rate

At this point in the process, you’ll want to make sure that you have a locked interest rate. A trusted lender will watch rates carefully and inform you when is the best time to lock in so you can get a good deal. Otherwise, you can watch interest yourself online by using your lender’s website or a third party’s mortgage calculator.

It’s important to note that interest rates are almost always unpredictable and change all the time, sometimes several times a day. It can be easy to go insane about locking in the lowest rate, but you shouldn’t hold it against yourself if you found a lower rate the second you locked in. These rates can also vary according to your credit score, geographic location, and type of loan you get, so what you find posted online may not be the exact rate you get.

10. Get Rid of Contingencies

If you are working with a real estate agent, the purchase offer should be reliant on a few factors:

  • Financing at a reasonable interest rate
  • The home passing an inspection without major issues
  • The seller disclosing known issues with the home
  • The home passing a pet inspection with no damages or infestations
  • The seller agreeing to cover agreed repairs

The contingencies should be figured out and stated in writing by the date specified in your offer. But some purchase agreements have contingencies that have constructive approval, meaning they are protested by the specified deadlines.

11. Depositing Funds

It’s common to make an earnest money deposit when signing a purchase agreement, letting the seller that you are serious about your intentions to buy the property. Because the seller will be taking the property off of the market, they will be getting the earnest money if you back out at this point. But if they back out, then the earnest money will be returned to you.

To complete the purchase of the property, additional funds will need to be deposited into escrow. The original earnest money is applied towards the down payment and the rest as well as the closing costs will be due at the time of purchase.

12. Inspect the Proper One Last Time

Before reviewing the documents, you’ll want to walk through the property one last time and make sure it is in the exact condition as when you last saw it. If any damage has occurred between now and the inspection or if anything is missing, it should be reported right away. It may extend the deal, but at least you won’t be suffering in the end.

13. Sign the Papers

The last but certainly not least important step is to review and sign the closing documents – after they have been reviewed by your real estate attorney. Around 100 pages is common, so there is no need to rush through it. You may feel some pressure from the seller, mortgage lender, or notary to get it done, but reading each and every detail is crucial because it will be affecting your finances and life for a long time.

Pay attention to the interest rate, ensuring that it is correct and there is no prepayment penalty. Also compare the closing costs to the estimate you were previously given and report any fees that are 10% over the estimate.

What to Expect

The closing a process of a real estate transaction can seem long and is indeed a lot of work. But in the end you’ll find that your patience and persistence will pay off. It may be a while before the seller or third parties agree to your offers, so you’ll want to stay busy while they work on their part of the deal. Also remember that it’s important to feel confident that you have done your research and have given a fair offer, otherwise, the closing process can take even longer.

Berry K. Tucker & Associates, Ltd.-Oak-Lawn-IL

Our attorneys have years of experience in negotiating during a number of real estate transaction. We will ensure that you get your dream home at the price you want to pay.

Berry K. Tucker & Associates, Ltd.

Our professionals are knowledgeable in a number of areas and have worked with diverse cases, negotiating to provide an effective solution for each client.

If you have any questions regarding the closing process of a real estate transaction, you can give the real estate attorneys at Berry K. Tucker & Associates, Ltd. a call at (708) 425-9530

Should You Hire a Real Estate Attorney?

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Buying or selling a property is certainly a big deal, and will come with big prices. So cutting expenses anywhere possible sounds like a great idea, until you find that you are responsible for the hidden mold infestation in your new basement. Suddenly paying a few extra dollars for a real estate attorney doesn’t sound so bad.

Here are some additional reasons why you should hire a real estate attorney:

  1. They are experienced and will review all the documents
  2. They can guide you through the real estate transaction process
  3. They will be with you during the closing meeting
  4. They will make or review any amendments
  5. They will save lots of time
  6. They will ensure fair deal and smooth process

1. Experienced and Will Review All Documents


After reading these benefits, you may find that working with a real estate attorney is in your best interest.

Especially if you are buying or selling your first property, the details of real estate paperwork can look like a foreign language. It’s tempting to just skip the entire thing and jump ahead to the signature, because you will finally either have the property or get rid of it, and that’s all that’s important, right? Not entirely.

An experienced real estate attorney will review each document carefully and will know exactly what to look for in the fine print. They will then inform you of all important details, ensuring you understand them entirely so you know exactly what it is you are signing.

2. Guide You Through the Real Estate Transaction Process

A regular real estate transaction is difficult, but a home sale contingency just makes everything a hundred times more complicated. Negotiating the price both before and after seeing the home can quickly get stressful, and even spur some regretful decisions whether you’re buying or selling.

But having a real estate attorney available to answer all questions and fight for your rights can make everything run as smooth as butter. They will also accompany you at the closing so you won’t have to worry about that part either.

3. Attend the Closing

Even when you are sure that you have a handle on everything before showing up at the closing meeting, many buyers and sellers will tell you that there will be surprises. The other party can include any requirements or inform you of any problems at the last minute that will leave you to make some quick, difficult decisions.

This is another common situation that real estate attorneys know very well. They will be by your side to fight for your rights and finally provide you with a recommendation based on years of experience, even if it means walking away from the transaction.

4. They Will Make or Review Any Amendments

Life happens. For this reason, amendments are common in real estate transactions, whether it’s pushing back the closing date, additional repairs are needed, or another last-minute event. The contract may need to be updated with a new price, closing date, or other terms.

All of these amendments will be handled by your real estate lawyer, whether it is drafting or reviewing the paperwork. The new terms will then be negotiated with the other attorney and explained to you in layman’s terms.

5. They Will Save Lots of Time

Real estate transactions can be extremely lengthy as both the buyer and seller have various obligations to meet before the closing date. In addition, you and the other party will also have to work with one or more of the following:

  • Title companies
  • County tax assessor
  • Local municipality
  • Lenders
  • Homeowners associations

Although these 3rd parties still don’t work faster with experienced attorneys, a lawyer can ensure a smooth process. This way you will be able to avoid mistakes that can set the process back a few months and even cause the deal to fall through.

6. Ensure a Fair Deal and a Smooth Process

When the realtors prepare real estate contracts, there is generally a modification period of 5 days that allows the attorneys on either side to make amendments. But what they can also do is revoke the contract if an agreement is not made.

With an attorney, they will explain the terms in their most basic format while ensuring they match your agreement. But if the deal still falls through even during the closing, your lawyer will protect your interests, even save you more money than the fees they charge.

Additional Real Estate Law Tips

Aside from the benefits of working with a real estate attorney, it is best to be knowledgeable of the conditions of real estate transactions and aware of the situations that can occur all before, during, and after the closing date. So here are some tips to keep in mind before even entering the real estate market.

1. What Illinois Law States

Every state will have it’s own laws regarding real estate transactions, but in Illinois, it is not required to work with a real estate attorney. They will also not be able to collect any commission from the transaction itself.

On the other hand, real estate attorneys can handle all legal tasks that agents will not touch. This can include creating the home purchase contract, performing a title search, and closing the deal. So if you are not familiar with the transaction process, you may want to consult with a real estate attorney.

2. Never Use the Seller’s Agent

Many home buyers make the mistake of thinking they can save money by using the seller’s real estate attorney instead of hiring their own. This way, you will only see the deal leaning towards their best interests, and then some.

In fact, their agent may even pressure you into letting them represent you; however, the deal will still end up in the seller’s favor due to the high commission they receive. Overall, it’s best to have your own agent – or even no agent – than settling for dual agency.

3. Maintain Control Over the Process

If you are looking to buy the property, make sure that you maintain control of the process at all times. You will be the one to make decisions while your agent scouts the market and your attorney handles the legal side for you.

If you feel that your agent doesn’t understand your needs or won’t take you to view the for sale by owner listings, don’t hesitate to reach out to another agent.

4. How Attorneys are Paid

Real estate attorneys usually charge by the hour, around $150 – $350, depending on experience. Although there are some that charge flat rates, depending on the transaction. You can also hire an attorney to cover specific parts of the transaction, such as only reviewing the documents or drafting amendments at a negotiated price.

5. Real Estate Agents Have a Conflict of Interest

Even when you don’t use the seller’s real estate agent, keep in mind that your agent may be battling an internal want to ensure that the deal goes through no matter what, because of their commission.

But if you read their reviews, a reputable agent will not insist on making the highest bid or recommend home inspectors make light of potential problems. Some food for thought.

Work with a Reputable Real Estate Attorney

After reviewing all these benefits, you may find that working with a real estate attorney would be in your best interest, especially if you are buying a property. But finding an experienced lawyer is extremely important to ensure that the deal is fair, there are no problems with the property, and the process runs smoothly.

Such attorneys include those at Berry K. Tucker & Associates, Ltd. In addition to 50 years of combined legal experience, our attorneys will review all documents carefully, reading all fine print, and will ensure that all deadlines are met. We are also offering a $195 special on all selling transactions!

Give us a call at (708) 425-9530 to inquire more about this deal or schedule an initial consultation with one of our experienced lawyers.

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