Quite often a buyer finds a home or property they like but still have an existing property to sell. One option to deal with this situation is for the buyer to submit an offer to purchase subject to their being able to sell their other property within a specific period of time.
This is called a “first refusal” offer because this buyer has an agreed upon right to purchase the property, if they can satisfy their condition. It is similar to, but not the same as a conditional sale and therefore the property continues to be actively shown and marketed to other potential buyers. Quite often a seller’s representative will accept a “first refusal” offer upon the seller specifying some conditions on the sale of the buyers’ property. For example, the buyer may have to agree to have their own property “listed on MLS within 48 hours at a price not to exceed…”
If a subsequent buyer comes to the table with an offer on the property, the seller is free to negotiate with that buyer to see if a better agreement can be achieved. If they come to an agreement, a special clause in the initial offer is triggered. This first refusal clause provides for the notification of the first buyer that the seller has agreed to a second offer and is giving them a period of time to determine whether they wish to confirm their purchase of the property by waiving their conditions and “firming up” their offer. Usually, 24 hours is allowed for this purpose. If the first buyer does not remove their condition in writing, within that time frame then their offer is null and void and the seller is able to firm up the agreement with the second buyer.
These situations can work out for both buyer and seller, although they do have drawbacks for each. A buyer in a first refusal offer does not have good negotiating leverage, so likely will have to offer closer to the sellers’ price and desired terms. Secondly, they will be selling their own property in a hurry to meet the deadline imposed, (usually 30 days or less) so they may not achieve full market value on the sale of their existing property.
The seller will benefit from getting a quality offer to purchase but it still does not guarantee a sale. However, other prospective buyers may choose not to view or put offers in on the property, knowing that someone else has first refusal rights on the property.
If you have any questions or would like to understand this process more fully; please do not hesitate to call us at 613-435-4692 or email to firstname.lastname@example.org