First Right of Refusal is part of most contracts that allow rights to both the seller and the buyer to continue the negotiation process if problems occur they can also be used to reserve the right for a known person to make an offer at any time a property is sold.
Lets look at some the instances that First Right of Refusal can be used and the benefits and drawbacks of these clauses.
The most common use of first right of refusal is an escape clause for the Seller. When a Buyer makes an offer on a home their purchase offer is often grouped with a number of factors that must come together to let the deal go through. Buyers have to get lending approved, sell previous homes, make moving arrangements and possibly request or wait for transfers to go through with their employer.
Because a seller can never depend that any buyer can follow through with their initial offer or meet seller deadlines a first right of refusal allows the seller to re-list the property while allowing the first offer to continue. This can last any amount of time but usually the time limit is days or months from the due date of the contract.
If the seller does find a new buyer for the home the seller must notify the first potential buyer and give them an opportunity to fulfill their agreement within a limited amount of time listed in their first right of refusal clause which is usually 24 to 72 hrs.
If the first buyer can not complete their negotiation then the second buyers offer can be accepted.
Another way that first right of refusal can be used is when one person agrees to sell a property to someone with the right to buy back the property if it is sold. This can happen when an estate is disposed of and one family member agrees that if the home is sold that they will give first right of refusal to the other family members. This type of deal can include any other sale negotiation such as a reflected discount on the apprased value of the home or a pre-negotiated price.
You may also see this type of negotiation when parcels of abutting land are sold especially in farming communities. Even an unrelated buyer and seller may decided that if the property to be bought or sold is next to their property a negotiated first right of refusal to purchase the property should be put in writing to eleminate headaches later.
Now each contract that a buyer and seller negotiates can be different but it must remain within the uniform laws of contracts. This means that the person getting something must give back something or there is no contract.
For instance you couldn’t write into a contract to sell your home to someone with the right to buy it back and not allow the seller to get either full value or another benefit.
You could however sell your home to someone and self finance the loan for the buyer saying if a time comes that they sell the home the fact you lent them money or hold a lean on the property would give you first right of refusal.
Again you really need to talk with a Lawyer about any clause you place in your contracts and it has to be defined within the law or it will later be struck down by a civil court judge.