Experience with Real Estate Mediation & Arbitration

We recently purchased a remodeled home, only to discover after close that many of the premium upgrades promised by the seller (a professional real estate development company) were false and misrepresented: really poor paint job/quality, poorly built and un-permitted deck, poorly installed windows/doors that have exposed the home to water damage, wood rot/mold issues that they claimed were addressed but actually covered up, many upgrades NOT done with permits (and the permit remains open despite promises to close before escrow closed), etc. We are considering legal action and want to see if anyone has had experience with mediation, and possibly arbitration? Legal fees to get to mediation seem to be ~$20k and for arbitration even greater. We've consulted a few lawyers who say that we have a case and hope we will be able to mediate, but we aren't sure at this point if it's worth the effort, especially if we end up having to go into arbitration, if our damages are less than $100k. Has anyone had experience with going through mediation & arbitration?

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Been there twice and know the routine but our claim was against the sellers (private party) and the real estate agent.  We won both cases... You are in a different much worse position since you are going up ageist a professional real estate development company.  If you can make the repairs for less than $200k do it and you'll come out ahead.  Look, just to get to arbitration you are going to spend $20k and that's only the begging.  The professional development companiy knows how to stall you and make you pay more money.  Which is what they have done so far.  And aren't they driving you crazy?  Remember a professional dev company has lawyers on salary, you are paying by the hour.  There goal is to make you spend as much money and waste as mush of your time as possible.  Appears they've been successful.  I suspect you will spend in excess of $100k to get the mediator to agree with you.  But here's the thing with mediation.  You will probably win, but that doesn't force the builder to do the work.  You have a victory on paper.  To force the builder to "fix" the issues you will have to go to court.  And you had better believe the builder will not do the work after mediation.

So let's say you win in court in a few years. Is the buider sitll in busiess?  Do you think the builder is going to do a "quality job"?  Of course not.  They will do the least amount of work they can possibly do and you still won't be happy.

But don't throw in the towel yet.  I'm surprised the none of the attorneys told you wnat to do.
Do you know the company names of the subcontrators?  Construction company, painters, electricians etc.  Go after their bond with the State of California.  Get the state on your side fighting for you.  Each one of these contractors has around a $20k bond with the state.  If you mess with their bond money they are out of busiess.  They have an incentive to "make things right".

As for the development company.  Some come and go.  They make their money and go out of business.  But here's what you do.  How many people are on the deed to your home?  You and a partner?  Each one of you should file a small claims court action against the builder for the max, I think it's now $15,000.  So if two of you are on the deed each one of you sue for $15k.  If there are two of you suing pick 2 different court dates.  Your goal is to make it as inconvenient as you can for the dev company.  Waste their time and money.

It's a lot less hassle to go to small claims court and the judge will more than likely feel sorry for you and give you the full $15K  times two so you get $30k.  And if you can sue the president and the officers of the dev company to make their life as miserable as yours. 

In the mean time get your house fixed.  Don't waste time or money on mediation.  A mediator will just have you make compromises.  But let me tell you finding a contractor you can trust in the Bay Area is not an easy task.

Hope you find this helpful. 

Good luck.