“Despite what your contract said, litigation isn’t free”
The overwhelming majority of residential real estate transactions go pretty smoothly, sellers want to sell, buyers want to buy, so everyone’s motives usually line up pretty well. However, human nature inevitably creates conflicts from time to time.
How do disputes get resolved?
Commonly when disputes arise between buyers and sellers, one side or the other will notice the provision in the contract stating that if the dispute goes to court, the prevailing party gets their attorney’s fees paid. “So, where’s the risk in digging my heels in and going to court, I’m right after all, so I’ll win!” Not so fast. First, whether you hire an attorney or try and handle it yourself, there are costs involved. If you represent yourself, there’s lost time, lost money perhaps, and increased stress. If you hire an attorney, they’re not going to work for free pending your “inevitable” win, you’ll have to pay them up front. Many attorneys will work on what’s called a “contingent fee” basis, where they get a percentage of whatever they collect on your behalf. That only really works with personal injury and a handful of other specific areas of law.
Next, let’s say you do win, judges normally do not award the victorious party all of their legal fees. There are many possible explanations for this trend, perhaps judges assume attorneys are always padding the bills, but suffice it to say you’re not likely to get an award that would pay you back in full. If your attorney shows the judge an attorney fee affidavit stating the total fee was $3,000.00, there’s nothing that prevents the judge from saying “I’ll award $1,500.00 in attorney’s fees”.
When do you win?
Finally, let’s say you win, you get the rare judge that awards you your entire billed legal fees, what now? Sure, would be entitled to the Earnest Money Deposit right away, but how do those legal fees or any additional damages get paid? Just because you have a judgment doesn’t mean that the money gets magically transferred from your opponent’s bank account to yours, you have to go through the collections process, which involves an entirely new legal process that often times takes much longer than the original lawsuit. The collections process includes such actions as wage garnishments, bank account garnishments, and debtor interrogatories (a process where a debtor is questioned about their assets). Now this part of the process might be handled for a percentage of the amount recovered by an attorney, but this reduces your recovery amount. Alternatively, you could handle the collections phase yourself, which again entails lost time and increased stress.
But wait, what about arbitration, isn’t that cheaper and quicker? Not necessarily. The arbitration process isn’t that different than going to court aside from the location. Plus, with arbitration, the parties to the arbitration pay the arbitrator’s costs and fees, in contrast to a judge who is a state/county employee.
The best means to resolve disputes is through negotiation outside of court, and this is coming from an attorney, who’d be paid more if you go to court than if you resolved the dispute before setting foot in a courthouse. Be wary of clients who will insist that “it’s the principle of the matter”. As I regularly tell clients “principle gets very expensive very quickly”. As frustrating as it can be, your clients will almost always be better off in the end by coming to a resolution of the dispute without going to court.
Robert Pope is a graduate from Virginia Tech with a Bachelors in Marketing and from George Mason University School of Law with a J.D. Robert has been licensed in Virginia since 2001 and in Maryland since 2012. Following several years of working for various title companies in the DC Metro area, Robert opened his own firm in 2014, focusing on real estate law, bankruptcy, and civil litigation. Having conducted over 3000 settlements, Robert regularly teaches classes to provide insight as to the settlement process for real estate agents. The best way to reach Robert is via email at rob@robertpopelaw.com