Mediation as the Solution for Defaulted Real Estate Transactions

There are many years where real estate market sees a sudden and unexpected increase in prices, followed by an equally abrupt and sudden decrease in prices. This means that many Buyers wouldn’t be able close their deals. The mortgages can’t be arranged for the prices they expect and this lead to defaults.

There are several factors in play:

  • Did they have to close?
  • Did they have the right to walk away from the deal?
  • Were they properly protected in the transaction?
  • Did they receive good and proper advice from their lawyers, mortgage brokers and real estate agents?


  • Do they lose their deposit?
  • Do they have to pay the Seller the differential in price (lost value)?
  • Do they have to pay real estate commissions?
  • Do they have to pay other costs and carrying charges to the Seller?


Where does the Buyer go for advice? This is difficult. Everyone has their “canned” approach to resolving these sorts of issues. A lawyer might suggest litigation, but that’s expensive. Someone else might suggest just “chalking this up to experience” and moving on. Which approach is right? Is there somewhere in between?


As a potential solution, mediation probably works well. It’s both cost and time efficient.

The Mediator will have a range of possibilities available, will meet with both parties and will propose a recommended settlement. Rarely, is that at the 50/50 point. You could do that kind of a settlement with a calculator from the dollar store.

The Mediator is someone who possesses “expertise” in the field.

A mediation would require the Mediator to investigate, determine the applicable facts and apply the law to the fact situation. Then, there’s the proposal. Both parties have to “buy in” before we have a deal.

Both the Seller and the Buyer will pay for the Mediator’s time equally. The Mediator is “working the deal”. It’s similar to acting for two parties, but they are both “customers”, neither are clients and no fiduciary duties are owed.

The Mediator is “working the deal”.

If there’s no solution found, then that’s too bad.

If a deal is struck then the parties have each saved tens of thousands of dollars in legal fees and saved several years of uncertainty and anguish.

Mediation makes good sense for defaulted real estate transactions.

Brian Madigan LL.B., Broker

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