Q: I have been trying to sell my home, and two days ago received a very good offer. The only problem is that the offer contract includes a clause that would require me and the buyers to use an arbitrator to resolve any dispute instead of hiring lawyers and going to court. My sales agent says I should accept the arbitration clause, but my attorney says I should reject it. What do you think I should do?
A: Most preprinted purchase contracts today include a one-paragraph arbitration clause. The typical clause states that, if a dispute between the buyer and seller ever develops, both parties will agree to have a professional arbitrator settle the disagreement instead of hiring lawyers and heading off to court.
I personally think it's best for both parties in a home sale to agree to an arbitration clause, but I'm sure this answer will trigger an avalanche of letters from attorneys who'll argue that sellers or buyers should never surrender their right to sue if their real estate deal goes awry.
I like arbitration because it's usually a faster and far cheaper way to resolve a conflict. The fees that arbitrators charge pale when compared to the costs that both sides will incur to hire separate lawyers and begin potentially lengthy court hearings.
A good arbitrator usually can issue a ruling quickly, which not only saves money but also allows both parties in the dispute to get on with their lives. Conversely, the very nature of the legal system - coupled with the fact that courts across the nation are already clogged with lawsuits - means that most buyers or sellers who sue instead of arbitrate must wait months or even years before their disagreement finally can be resolved.
Your letter states that the offer you've been given by the prospective buyers is "very good." If your only concern is the arbitration clause, you can simply accept the offer on all its other terms but cross out and initial the paragraph that asks for arbitration.
By crossing out the clause, you'd essentially be making a counteroffer that the buyers could then either accept or reject. There's a chance that they might still agree to go forward with the purchase, but an equally good chance that they'll simply decide to look for a different home to buy - especially if they feel that your refusal to accept arbitration is a sign that you're a "sue-happy" seller who will rush to court if the deal turns sour.
Q: You recently wrote that a bankruptcy can stay on a consumer's credit record for up to 10 years. I have never filed for bankruptcy and have always paid my bills on time. How long does positive information stay on a person's credit report?
A: Positive information about your credit history, such as monthly payments you have made promptly to mortgage lenders or credit-card companies, become part of your permanent credit record. Generally, this good stuff will stay on your report forever, unless you personally request that it be removed.
Q: Our son will be entering college in the spring, so we are applying for every kind of student financial assistance that the government has to offer. We don't earn a lot of money, but our home is worth nearly $200,000 more than we paid for it. Will the fact that we have so much equity in our house hurt our chances of getting college aid?
A: Probably not. The government generally doesn't consider how much equity that parents have in their home when determining a student's eligibility for a federal loan or grant.
Obviously, a federal or state grant is much better than a student loan because a grant doesn't have to be repaid. But if you can't qualify for a free grant, it might make better financial sense to either refinance your house or take out a home-equity loan to pay for your child's college education than to get a student loan: Interest rates on most home mortgages are lower than rates on student loans, and all of the interest you'd pay would likely be tax-deductible. Talk to an accountant for details.
- David W. Myers is a 20-year veteran of the newspaper and magazine business, having previously covered real estate for the Los Angeles Times and Investor's Business Daily.