Alpine Homes Utah

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Oct 17, 2011
Category: General
Posted by: andy
Today I walked through the home since all the framing was complete.
Oct 15, 2011
Category: General
Posted by: andy
Threw together a quick website to be of service to those buying a home.

Arbitration

Let's start out by saying you don't want the word arbitration in your contract with a builder. If something goes wrong and you need resolution as the consumer/buyer you will be in a much worse situation than if you had options to go to court. ***Contracts written up by builders that have arbitration clauses are notoriously biased in favor of the builder. In some cases the contract is so biased that judges have deemed them not contracts at all, since a contract is a two way agreement. For a consumer, the buying of a newly built home can be very risky. The situation is you are buying an unknown product with a completion date that cannot be determined. There is no information regarding subcontractors. The selling agent is representing a large corporation many times requiring a significant down payment and a contract that is complicated to say the least. Consumers seem to have their guard down compared to many other types of real estate transactions because of the newer nature of the product. The reason they include arbitration is because it benefits them or they wouldn't put it in there.

Arbitration was meant for two sides that are of similar demographics such as two large companies trying to hash through a contract disagreement. It wasn't made for common consumer trying to resolve a dispute with a company with lots of assets and seemingly boundless resources. The fees are too high for the average consumer to deal with enough to cause the builder to win before arbitration even began. On top of this the RESPA (Real estate protection act) sections 6 and 9 states that the builder doesn't need to abide by the outcome of an arbitration decision and they have the option to take it to court. The consumer doesn't have that luxury. At this point the consumer has already likely paid out of pocket 10's of thousands of dollars. Arbitration was never meant to be used in this way but corporations found this loophole that benefited them greatly and started using it.

I don't claim to know the costs of arbitration in cases of real estate but on woman explaining her case with arbitrating with a builder had costs upwards of $100,000. To start the process was an initial $3000 just to file. The cost for the arbitrator to review and rule on the case was $12,500. I don't know the details that brought the case to the higher amounts but $15,000 doesn't seem to be in my price range to deal with a builder that has built my home incorrectly. The costs associated with going to court would be about $200 which would include the cost of reviewing the claims and making the final judgment. It sure seems to me the better way to go.

So my advice to you would be to avoid arbitration in any contact where you have so much more to lose than the other party. The little guy vs the big business will always benefit the big business. There are cases where arbitration is beneficial. In cases where both parties are on similar playing fields such as a consumer selling a home and a consumer buying a home, or a big business with a big business. Just avoid the unbalanced situation that comes with buying a new home from a builder.

Alpine Homes Utah