Right of First Refusal – What is It?
What Is a Right of First Refusal
The phrase “right of first refusal” can a very powerful tool, if used correctly.
To have a right of first refusal is exactly what it sounds like. It occurs when a buyer may want to buy a property but is unable to buy at that particular moment in time. Then when a seller gets ready to sell the property the original buyer has the right to buy it before the seller can sell to another person. Thus, the buyer has the first right to buy the home.
Is This a Lease Option?
This process is similar to a lease option but with some pretty big differences.
In a lease option, the person who is buying the home is putting down an option payment and has a contract to purchase at any time during the contract period. The seller is obligated to sell the home to the buyer. Thus, during the contract period, the buyer has control.
In a right of refusal scenario, the seller is the one with the control. The buyer has the right to buy. But, it is the seller who dictates when it is going to be sold. If the buyer is unable to buy at the time then the seller can sell to another party.
When to Use It
The right of first refusal can be used in several situations.
For a buyer, it can be used when you want to purchase something and the seller is not quite ready to sell. Maybe the home is in probate, a divorce, or has some other legal holdup. When the issue has been resolved then the buyer can then buy at that time.
For a seller, it can be used when you may give someone you know the right to buy something before you actually sell it. You are not quite ready to sell. Yet, you would like to know that there is a buyer ready and willing to purchase.
A right of first refusal is a great way to show interest in a piece of property without having an actual contract in place.
It can be beneficial to both parties if used correctly.