The Mediation Process

The association of Realtors® has a certain process for handling disputes that happen during a residential transaction, which is formally known as the Buyer-Seller Dispute Resolution System – sometimes just referred to as DRS or mediation. (PAR’s commercial forms default to a different arbitration process.)

It’s important to understand how the mediation process works because the PAR Agreement of Sale has language in which the parties agree to mediate any and all disputes arising from the transaction, and not properly following the rules could affect a party’s rights under the contract – including how deposits are handled and distributed. Read on if you’ve ever had to refer a client to mediation and don’t know what we’re talking about – and also if you have dealt with it before, but just need a quick refresher.

First, what is it? Mediation allows buyers and sellers with disputes to avoid litigation, which can be time-consuming and costly. It is not meant to be an adversarial event, so there are no witnesses, evidence or even attorneys needed. It is simply a discussion between the parties that is facilitated by a neutral third party. The mediator does not make a decision about who is right or wrong, nor do they render a verdict. There is nothing that will result from the mediation that the parties do not agree to.

How do you start it? Either the agent or your client (preferably the client) can contact your local Realtor® association to ask for a Request to Initiate Mediation form. If your local association is a member of the PAR statewide cooperative, you would contact PAR’s program administrator to make this request.

How much does it cost? That depends, but it will likely be at least a few hundred dollars. Requests made to PAR have a non-refundable filing fee of $100 which must be provided with the completed paperwork. The mediators set their own costs for the mediation itself, usually an hourly rate, which can vary based on their location and experience. The Agreement of Sale states that the parties will split this cost evenly, but they can agree to do otherwise. Once the parties agree to proceed with mediation, they will be provided with a list of qualified mediators and their fees.

How long does this process take? Again, it depends. Because the parties work directly with the mediators and their differing schedules, timing could take anywhere from a few weeks to a few months.

What if it doesn’t work? A large portion of disputes can be resolved with the help of a third-party after the parties have been given some time to cool down. However, if mediation is unsuccessful then either party may file a civil lawsuit against the other before the magisterial district judge or the Court of Common Pleas, depending on the nature of the controversy and the amount in dispute.

Are lawyers involved? If you sense that a transaction is going awry and you’re unable to get it back on track, you should always suggest to your client to contact legal counsel as soon as possible. Even though they will not need an attorney to attend mediation, attorneys are generally permitted to attend and your client may want them present. Also, it can be helpful to discuss possible outcomes and alternatives prior to the mediation. For example, if a seller’s attorney advises them that they have a weak position and risk losing if a lawsuit is filed then they might be more willing to settle in mediation than if their attorney advises that they will be likely to prevail at a trial. Many attorneys also work as mediators and may be able to provide some helpful advice prior to mediation.

What if one of the parties refuses to mediate? The mediation paragraph in the PAR Agreement of Sale has language in which both parties agree to mediate their disputes. If one party refuses to mediate or simply doesn’t respond to the request, then the other party can certainly take their issue to court, and if they point out to the court that mediation is part of the contract the judge will often order the parties to mediate as the contract says. So whatever you do, don’t tell a client that they can or should try to duck mediation if a request has been filed by the other party.