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Real Estate Tip
 for Home Buyers and Sellers

Don't sign the optional arbitration agreement in the Purchase Agreement.
  The standard Purchase Agreement form used by realtors in Minnesota contains an optional arbitration agreement.  By signing this you give up your right to sue the other party in court. 

Arbitration will cost you more money than Conciliation (small claims) Court.  Public Citizen, a consumer advocate group, reported that the forum costs charged by arbitration services can be up to five thousand percent higher than the cost to initiate a court case. http://www.citizen.org/publications/release.cfm?ID=7173.  That report went on to explain that the arbitration costs involved in arbitrating a case under a mandatory arbitration agreement signed before there was a dispute were significantly higher than the costs to arbitrate a dispute under an agreement entered into after the dispute arose. 

If a dispute does arise and your claim is less than the $7,500 Conciliation Court limit, you would be better off using Conciliation Court to resolve the problem than arbitration.  In Conciliation Court, you don't need a lawyer to represent you and the filing fee will be much less than what you would be charged in arbitration.

If you have a claim that's greater than $7,500, you and the other party can choose at that point to use arbitration or mediation to resolve the matter.  At any rate, even if you choose to sue the other party in district court, the court will require you to go through some form of arbitration, mediation or other alternate dispute resolution.

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