REALTORS® & Arbitration

Alternative dispute resolution, or ADR, has received a lot of press over the past several years as the “new way” to solve legal disputes. Courts now regularly include mandatory ADR processes in pending lawsuits.

Yet, for decades, REALTORS® have quietly and effectively been using ADR in their daily business relations with one another. Since 1913, REALTORS® have imposed on themselves the obligation to arbitrate their disputes.

Why did REALTORS® early on decide that arbitration was the way to go? One reason is cost. A REALTOR® has a forum to resolve a dispute with another REALTOR® without the cost of litigation. An attorney isn’t required, and many arbitrations proceed without attorneys.

Another reason is time. Many arbitrations can go from filing to conclusion in three months, whereas a court docket can easily run a year and sometimes two or more.

A third reason is peer review. Some people criticize arbitration because panels aren’t trained “enough.” However, wouldn’t a party rather present its case to a panel of REALTOR® peers than to a judge or jury, who have no knowledge of the standards of practice in the industry? A fourth reason is privacy. The proceedings are confidential. REALTORS® won’t see their name in the press after they win or lose a large commission case.

Finally, REALTOR® arbitrations are generally just between REALTORS®. Our clients usually don’t get stuck in the middle of our disputes.

Are there problems? Sure. Some criticize the panels as not being sufficiently trained. There’s always merit in more training. Some criticize the panels as not being consistent from case to case. If you’ve ever sat on an arbitration panel, you know it’s absolutely true that every case is different; in that sense, the arbitration process is much the same as a case before a jury. In arbitration, though, the “jury” knows the business and thus has a better opportunity to make a reasoned decision.

REALTORS® were ahead of their time in instituting arbitration and mediation programs (for more on mediation, see REALTOR® Magazine, June 1999, page 61). Every day, REALTORS® go about their business of resolving disputes through arbitration, knowing that’s just the way it’s done. Although we can improve the system and modernize it, let’s recognize the outstanding pioneering processes we’ve fostered throughout the years.