Mediation Before Litigation Under AAR Purchase Contract

Question: We signed the standard Arizona Association of Realtors (“AAR”) contract to purchase a home in north Phoenix and deposited $25,000 earnest money in escrow. We then received the Seller Property Disclosure Statement (“SPDS”) from the seller. On the SPDS, lines 64-68, the seller denied having any prior roof problems. We then closed the purchase of the home. One month later there was a major thunderstorm, and we had major roof leaks in both the living room and the kitchen. A roofing contractor said that we need a new roof at a cost of at least $30,000. Our broker said that the seller claims to have never had any roof problems, and that the seller won’t pay for a new roof. We want to sue for at least the $30,000 cost of a new roof, but our broker said that under the purchase contract we have to first schedule a mediation, and try to settle at mediation before we can sue in court. Is that correct?

Answer: Yes. Under lines 325-333 of the standard AAR contract both the seller and the buyer agree to mediation before any lawsuit. There are many experienced mediators, including several retired judges, who are excellent mediators. Mediators are like baseball players. The higher the batting average of a baseball player, the higher their income. Similarly, the higher the settlement average of a mediator, the higher their income. The best Phoenix mediators, with the highest settlement averages, charge up to $600 per hour, and can make more than $500,000 per year.

The hiring of the best mediator to try to settle your $30,000 roof claim will be well worth the money. There is some truth in the maxim that “a bad settlement is better than a good lawsuit.” For example, if this $30,000 roof dispute with your seller doesn’t settle promptly, the cost of filing a lawsuit, depositions, interrogatories, and other discovery; and filing and responding to Motions for Summary Judgment, could cost you as much as $100,000 in attorney fees, and like the old Carpenters song “you’ve only just begun.”