Imagine for a moment that you’re able to make an offer on a home before any other individual is able to even look at it. This means that if you have a right of first refusal negotiated into any kind of lease or other form of housing agreement, you will get to be the first person in line to purchase a piece of real estate.
Generally defined, the right of first refusal is a provision contained in a lease or other type of agreement that offers a potentially interested party the right to purchase a property before a seller is able to negotiate any other offers. Typically, this is written up prior to a homeowner placing their property on the market for sale. This type of clause enables the seller to market their home at will; however, this is where everything might end.
Essentially, they will be able to list the home itself; however, before they would even be able to accept the first offer, the owner will legally have to notify the individual who is entitled to the right of first refusal. From there, the contract holder will then be able to decide whether or not they wish to purchase the property.
If they choose not to purchase it, then the homeowner will be free to negotiate other offers with other potential buyers who may be interested in purchasing the property.
In terms of when this type of clause if used, there are actually a few different situations in when this occurs. These include the following:
-Between both a tenant and a landlord.
-Between various family members.
-Whenever there is a situation involving a condo board or a homeowners association.
-Whenever there is a right of first refusal clause contained in a leaseholder’s contract, this gives the leaseholders the right to purchase a home that they are living in in the event that the landlord decides to sell it. This specific clause is negotiated into the contract from the beginning of the lease, meaning that the tenants could have a decent amount of time to save money for a down payment of some type prior to having the opportunity to purchase the property itself.
On the other hand, this does not necessarily mean that those who hold the right of first refusal will always have it easy, as the biggest disadvantage is that since the seller could end up receiving an offer from a third party at any time, the buyer may need to be prepared on short notice to move forward with a sale.
In terms of the buyer’s market, whenever there are plenty of homes and lower prices, the right of first refusal clause is something that can greatly benefit sellers. This is because the homeowner can likely persuade the original interested party to pay much more than what the home is currently valued at. However, sellers will ultimately need to be wary of this type of clause since it could hinder their overall ability to work with other buyers. This is because they won’t be able to negotiate with a third party until they have received a formal termination of this contingency from the holder of the right of first refusal clause.
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