Question: We bought our house about a year ago. Recently, we discovered a number of defects, which were not disclosed to us by the sellers. For example, we were told that the electricity had been upgraded, when it was not. We were also told that there never was a water problem in the basement, but some recent rainstorms have literally flooded the downstairs area. We have reason to believe that the sellers flat out misrepresented certain facts in the seller disclosure form which they gave us.

The approximate cost to correct these repairs will be about $9,000. We sent a demand letter to the sellers, and they have denied making any false statements. Our sales contract provides that any dispute between buyer and seller must first be mediated. Accordingly, we went to mediation, but without success.

The mediator suggested that instead of filing a lawsuit, we should go to binding arbitration. What is the difference between litigation and arbitration?

Answer: First, do you really want to spend a lot of time fighting over this matter? While I am not in any way belittling the amount that it will cost you to repair, if you decide to retain an attorney, the cost of the legal fees may very well exceed the amount of your damages. Sometime it pays to accept the fact that you may have been misled, but correct the problems and move on with the rest of your life. Sitting in a court of law -- or appearing before an arbitrator -- can be a traumatic, frustrating event.

Alternative dispute resolution -- commonly referred to as ADR -- has become commonplace in todays economy. More and more corporations are requiring arbitration in the event of a consumer dispute. Our courts are divided on whether such "arbitration clauses" in boilerplate contracts are valid and enforceable. Some courts take the position that unless the consumer fully understood the consequences of arbitration when they signed the contract, that clause cannot be enforced. Other courts have taken the opposite position.

Where two parties have voluntarily entered into a contract which requires arbitration, however, in most cases the Courts will not permit the dispute to be litigated. Throughout this country, Judges will always say "the Courts favor arbitration."

As we all know, litigation is time-consuming and expensive. Courts throughout this country have excessive case loads, and despite the sincere efforts of judges and court administrators, litigation still can drag on for years before a final resolution is reached. And, as we saw recently in the now infamous "missing pants" lawsuit, frivolous, vexatious lawsuits can also be brought -- even by Judges.

One method of resolving a dispute is arbitration. If both parties to a dispute agree to take their case to binding arbitration, then under most circumstances an arbitration proceeding can be completed within less than a year, and often less than six months.

I used to think that arbitration was less expensive than taking a dispute to the courts. However, several years ago, Public Citizen -- a public interest non-profit organization -- issued a report which indicated that arbitration may in fact be more expensive for consumers and employees than using the Courts.

According to Public Citizen, "The cost to a plaintiff of initiating an arbitration is almost always higher than the cost of instituting a lawsuit." For example, arbitration may cost each participant several hundred dollars just to start the process; filing a lawsuit in the DC Superior Court will only cost you $120.00.

Additionally, Public Citizen determined that "arbitration saddles claimants with a plethora of extra fees that they would not be charged if they went to court."

In case you are still interested in pursuing arbitration, here is how it works. If you are using the services of the American Arbitration Association -- the leading organization in this field -- you file your complaint with the local AAA. A fee is charged, based on the amount you are claiming against your opponent.

The AAA will assign a caseworker, who will coordinate the proceedings. Both parties will receive a list of approximately 20 potential arbitrators. Each listing will contain a brief biographical statement on each individual. Both sides can, for whatever reason (or no reason) cross off as many names on the list as is desired. Once the Association receives the lists back from both parties, an arbitrator will be selected from among the individuals whose names were not deleted.

The arbitrator will then be assigned the case. A calendar will be submitted to both sides, who will be asked to cross off dates that are not available for the hearing. Once the arbitrator receives the list of available dates, and also determines approximately how many hours or days the arbitration proceeding will take, an arbitration date will be selected.

Under some circumstances, the rules of the AAA permit the parties to engage in a form of discovery proceeding, whereby either side may pose questions which must be responded to in writing, promptly by the other side. Discovery is at the discretion of the individual arbitrator.

Incidentally, you can have one arbitrator, or you can request a panel of three arbitrators.

On the day of the arbitration hearing, the arbitrator will conduct a relatively informal hearing. People often sit around a conference table at the local office of the AAA or in the arbitrator's office, and it clearly is much more informal than the court system.

Once the opinion is handed down by the arbitrator, it generally is binding on all sides. The case law throughout the country is very clear that mandatory, binding arbitration will rarely be overruled by the courts. Courts will only overturn the arbitrator if he or she was arbitrary or capricious in rendering a decision.

Many years ago, I was a strong advocate of the arbitration process. Over the years, however, I have changed my mind. My concerns go not only to the costs of arbitration. In a court of law, there are a number of due process protections afforded both sides, which may not be available with arbitration. The Rules of Evidence -- no matter how archaic they may seem -- will exclude certain evidence which has no place in a courtroom. For example, hearsay evidence, where one person testifies what another has told him or her, is generally not admissible in court.

In an arbitration proceeding, however, the arbitrator will usually admit all evidence submitted by both sides. The rules are lax and the arbitrator makes the call.

Another drawback to arbitration is that the arbitrator (or panel of arbitrators) is not required to file a written opinion. Often, the arbitrator hands down a one paragraph decision, awarding a sum of money to one side or the other. Clearly, the losing party is entitled to know why he or she lost, but in the absence of a written explanation, parties are confused and indeed upset.

In a court of law, all of the parties in the litigation usually understand the rationale behind the judge's opinion -- whether or not they agree with the final order. The judge will either give an opinion from the bench with a lengthy explanation, or write a comprehensive decision accompanying the court order.

Finally, one of the hallmarks of our legal system is the right to appeal a lower court decision. Judges are human and can (and do) make mistakes. The appellate process gives the losing party another bite at the apple. The appellate court will not overrule the trial court's determination of facts, but will carefully analyze the facts as they relate to legal principles. As indicated earlier, the arbitrator's decision is generally not appealable.

Clearly, there is merit to arbitration in many instances. If a dispute is in the $5 to $20,000 range it may not pay to spend the same amount of money for legal fees in litigation. Often, however, small claims courts are the best means to resolve small disputes. You should check the jurisdictional amount for the small claims court located in the county or the city in which you live.

In Maryland, Virginia and the District of Columbia, if your claim is for $5000 or less, you can use the services of the Small Claims Court. (In Maryland, it is known as the District Court, and in Virginia referred to as the Small Claims Division).

Your claim is for $9,000. If you are willing to reduce your claim down to $5,000, you do not need an attorney to file in the Small Claims Court where your property is located. Often, the mere filing of the lawsuit will spur the other side to try to reach an amicable settlement.

NOTE: The Public Citizen report, entitled "The Costs of Arbitration", can be found on their website at publiccitizen.org .