FiChai

Seems like the asking $500 is for the client themselves and the extra $130 is suspiciously for the lawyer himself/herself for the service provided. If the original contract of purchase & sale (the offer) clearly stated that the door should be fixed or $500 would be deducted, the seller bears that liability no matter what. The process in between might not be in the correct procedure though.

FiChai

I agree. Averagely, a lawyer will charge more than $250-300 per hour. How many hours do you think they need to fight for a $500 case? Do you think the previous owner will spend at least a couple thousands to hire a lawyer just to fight for your $500? You can simply attend to the small claim court as a defendant, show the original legal binding contract with the previous owner's signature, that it's his/her legal liability to bear the $500 door fixing cost.

FiChai

We are not sure if the lawyer who is handling this case was the same one being hired for the previous transaction. He/she might know nothing about the precious deal. For what the previous owner hired him/her this time is to chase the $500 after you, of course no lawyer will refuse doing such a job, even they know no details.
But you have the original offer on hand, have the previous owner's signed, means you know you are not at fault to have the money being held back. However, the progress might not be in the most appropriate procedure, cuz the previous owner should have a choice to either re-fix/replace the door for you or agree that you could hold back the $500. But the original offer is a binding contract so you didn't owe the previous owner that $500 at all.

FiChai

I agree. Life is like that. Sometimes it's not about you are right or wrong, but it's about how much time and effort you need to prove yourself is right! Referring to the original contract of purchase and sale, I am pretty sure the righteous is on your side. However, if you go to court, it's very likely you can keep the held back $500 but may still need to pay for the needed administration fee (the hundred something), that judges by the arbitrator. You may also need to take a day off or so, to attend court. See which thing you rank is more important, righteous or time.