Imagine being able to make an offer on a house before any other interested home shoppers can even have a look-see.
If you have a right of first refusal negotiated into a lease or other housing agreement, you get to be the first in line to buy the real estate.
But is this truly an advantage for the right-of-first-refusal holder? And how does it work? Let’s take a closer look at right-of-first-refusal agreements and what they mean for both buyers and sellers.
What is a right of first refusal in real estate?
In real estate, right of first refusal is a provision in a lease or other agreement. It gives a potentially interested party the right to buy a property before the seller negotiates any other offers. It’s typically written up before a homeowner puts a property on the market.
This clause allows the sellers to market the home at will, but it might end there.
They can list the house, but before they can even think about accepting that big first offer that rolls in, the owner must notify the person entitled to right of first refusal. At that point, the contract holder can decide whether or not to buy the property.
If this person declines, the homeowner is free to negotiate with other potential buyers interested in the property.
When is a right of first refusal used?
There are a few situations in which a right-of-first-refusal clause is relevant.
Between a tenant and a landlord: If a tenant or tenants are interested in buying the rental property they live in, and have a right-of-first-refusal clause written into the lease, the landlord must consider their offer before negotiating with other potential buyers.
Between family members: Usually, this clause is used when a family member wants to buy the home. The family member (or members) in question have a chance to submit their first offer when the house goes on the market. But if the family isn’t interested in the real estate at that time, the owner can open it up to a third party.
When dealing with a homeowners association or condo board: Sometimes a homeowners association or condo board will put a right-of-first-refusal clause into its governing documents. This allows the board to vet potential buyers before a homeowner can accept an offer. Many communities use the clause to prevent situations like discount sales that would lower their value. In some cases, it even gives the board the option to reject an offer entirely.
Read more like this on Realtor.com
Related Links
The Monthly Rent Benchmark That Might Make More Sense Than the 30 Percent Rule
Found The One? 10 Things To Do Before Making an Offer on a House
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
