#TipsoftheTrade: First Right of Refusal

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You may have heard the term first right of refusal, but do you know what it means in the real estate world and why we use it?  It’s a negotiating tool that isn’t used very often, but can come in handy for buyers and sellers alike.

In a nutshell, first right of refusal means that a buyer and seller have agreed to price and terms on a property, but there is a contingency that is keeping the sale from proceeding at the moment of offer.  The most common contingency we see is the sale of another house.

Picture it: Mr. & Mrs. Smith want to purchase a house from Mr. & Mrs. Robinson, but the Smith’s have their house on the market for sale and do not really want to own two homes at the same time, however they do not want to lose the opportunity to purchase the house from the Robinson’s.  The Smith’s are able to afford two houses at once if absolutely necessary, so they decide to make an offer on the Robinson home.  While it is contingent on their home selling, it has a first right of refusal clause.

This means that the Smith’s and Robinson’s have agreed to terms and conditions but the Robinson’s will continue to market their home for sale until the Smith’s home goes under contract.  If, however, the Robinson’s receive a higher offer, the Smith’s must decide in a predetermined amount of time (usually 24-48 hours) if they want to purchase the house from the Robinson’s without their home going under contract.  They have the first right to refuse the purchase of the home.  If they do, the contingency is removed and the Smith’s begin the loan and purchase process.  If not, then once in writing, the Smith/Robinson contract is officially null and void and the Robinson’s are free to negotiate the new offer.


Buyer Benefit:  Buys time for you, giving you time to remove a contract contingency without losing the property to another buyer.

Buyer Beware: If a higher offer comes in, you will likely have a very short window to make a decision about removing the contingency on the contract and moving forward with the purchase

Seller Benefit: Secures a buyer for your property at a price and terms you can live with, but also affords you the opportunity to continue marketing to other buyers to try to get a higher offer.

Seller Beware: If a time limit on the first right of refusal is not specified, you will not have a good idea of when you will be making your next move and if your plan is to purchase another property, you may have to wait a bit.


First Rights of Refusals are just one of many tools in our negotiating tool belt that we use to help achieve the goals of both buyers and sellers.  Sometimes Realtors have to think outside the box to make everyone happy and that’s not something we’re afraid to do!  Want to chat more about your specific situation?  CONTACT US NOW!




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