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What Is a Right of First Refusal in Real Estate? Getting First Dibs on Making an Offer

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Imagine being able to make an offer on a house before any other interested home shoppers can even have a look-see.

If you have a right of first refusal negotiated into a lease or other housing agreement, you get to be the first in line to buy the real estate.

But is this truly an advantage for the right-of-first-refusal holder? And how does it work? Let’s take a closer look at right-of-first-refusal agreements and what they mean for both buyers and sellers.

What is a right of first refusal in real estate?

In real estate, right of first refusal is a provision in a lease or other agreement. It gives a potentially interested party the right to buy a property before the seller negotiates any other offers. It’s typically written up before a homeowner puts a property on the market.

This clause allows the sellers to market the home at will, but it might end there.

They can list the house, but before they can even think about accepting that big first offer that rolls in, the owner must notify the person entitled to right of first refusal. At that point, the contract holder can decide whether or not to buy the property.

If this person declines, the homeowner is free to negotiate with other potential buyers interested in the property.

When is a right of first refusal used?

There are a few situations in which a right-of-first-refusal clause is relevant.

  • Between a tenant and a landlord: If a tenant or tenants are interested in buying the rental property they live in, and have a right-of-first-refusal clause written into the lease, the landlord must consider their offer before negotiating with other potential buyers.

  • Between family members: Usually, this clause is used when a family member wants to buy the home. The family member (or members) in question have a chance to submit their first offer when the house goes on the market. But if the family isn’t interested in the real estate at that time, the owner can open it up to a third party.

  • When dealing with a homeowners association or condo board: Sometimes a homeowners association or condo board will put a right-of-first-refusal clause into its governing documents. This allows the board to vet potential buyers before a homeowner can accept an offer. Many communities use the clause to prevent situations like discount sales that would lower their value. In some cases, it even gives the board the option to reject an offer entirely.

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County commissioners talk housing with Grand Foundation

 
 

Approaching a year after the East Troublesome Fire destroyed 366 homes, including 132 belonging to fulltime Grand County residents, there are still a few families that haven’t been able to find stable housing.

Grand County Housing Authority Director Sheena Darland explained to commissioners during a workshop Wednesday that while some have moved to other towns and want to come back, others spent the summer tent camping.

“They’re to a point where they’re facing wintertime in a van, some of them, or a tent,” Darland said.

Using the Grand Foundation’s Grand County Wildfire Fund, those families will not be spending the winter in a van or a tent. However, the fund might have to pay several months of a hotel bill for those families that cannot find housing, which isn’t an ideal way to spread those donated dollars.

“Oct. 21 marks a year and we still have five families,” Grand Foundation Executive Director Megan Ledin said to commissioners. “We have the funds to help them. We have the funds that can make a bigger impact overall, so what can we do?”

The biggest problem is that there are simply not many places in the county, let alone affordable places to own or rent.

The Grand Foundation is looking to steward a purchase to grow the affordable housing inventory of Grand County. One such way, Ledin explained, might be to purchase and renovate former motels, of which there have been a few on the market in Grand.

Ledin emphasized that the Grand Foundation does not want to own any property, and so would look to donate any purchase to the Grand County Housing Authority. The local housing authority would probably manage the homes like it manages the senior housing in the county, charging rent equal to 30% of the family’s income.

According to Ledin’s proposal, once purchased, the newly available affordable housing would go toward housing displaced fire families. Once those families find permanent accommodation through rebuild or purchase, the housing could then serve others in the Grand County workforce.

“We have people who had a tragedy and lost their homes, who still don’t have a place to call home,” Ledin said. “What can we do together (is) start with one problem but ultimately help another problem, a much larger problem.”

In Ledin’s proposal, the Grand Foundation would find the funds for three-quarters of a purchase and look to the county to fund the other 25%. For the county, which has seen a fiscally prosperous 2021, this seemed a doable ask.

While it was a workshop and no official decisions were made, the commissioners said they were open to such a deal and would look at a more solid proposal from the Grand Foundation should the organization find a place to purchase.

Also during Wednesday’s workshop on housing, Ledin outlined the Grand Foundation’s two housing assistance funds, which are not fire related. The two separate but similar funds started with the Winter Park Housing Assistance Fund, which was seeded by the Winter Park town council and other entities to serve Winter Park’s workforce.

The fund works to help bridge the gap in affordability. With the guideline that rent should equal about 30% of a monthly income, if someone finds a place to live above this proportion, they can apply to the housing assistance fund to make up the difference for a year.

The program was so successful in Winter Park that the Grand Foundation created a second fund, this one serving all of Grand County. The grants from both funds can also contribute to down payment assistance.

The two funds remain separate because of how the money was allocated, though applications are taken on a case-by-case basis. This means that an applicant outside of Winter Park may still be able to utilize the Winter Park fund, depending on certain factors, and vice versa. The Grand Foundation funds both equally.

The Winter Park fund has awarded over half a million dollars through 526 grants, with 38% going toward Winter Park residents, 31% in the surrounding Fraser Valley and 30% in other parts of Grand County. The Grand County fund has awarded over $288,000 through 482 grants, with 10% going to Winter Park, 30% to the surrounding Fraser Valley and 60% in other parts of Grand.

The Grand Foundation and Grand Lake’s government have put dollars toward the Grand County Housing Assistance Fund, but Ledin wanted to see if the county might be interested in contributing.

“I can’t speak for the county, but I believe that your constituents would be very passionate about you investing into at least this one piece to continue to help our workforce afford to live here,” Ledin said.

The Grand Foundation is also approaching other towns in the county about contributing to the Grand County fund as a way to grow its funding and support for affordable housing,

“There’s so many siloed things going on in relation to housing in our community,” Ledin said. “If there’s even one way we can all come together, that’s what we’re here (for) and we’re about. We’re a community foundation.”

Commissioners were also amiable about putting money into this fund.

Ledin added that she’s working on further reach out with the western side of the county to make sure folks know about the Grand County fund, which sees fewer applications from Kremmling and surrounding areas.

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Just Listed: Evergreen Lot Ready for Mountain Dream Home

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This 2.31 acre lot in Evergreen in the Brook Forest area is ready for your dream home.

Spectacular rock outcroppings add so much visual interest and privacy to the area. A flatter area near the top of the lot is the perfect spot for a spectacular home and a large deck with sweeping views of the surrounding hills. Bring your own builder, or the seller is a custom builder and will design/build the perfect home including a drive way. Water is available at the street, and buyer will be responsible for the water tap during the build process. Septic will also be installed during the build.

Listed by Joy Opp for West + Main Homes. Please contact Joy for current pricing + availability.

 
 
 

Have questions?
West + Main Homes
(720) 903-2912
hello@westandmainhomes.com

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Joy Opp
(303) 868-8769
joy@westandmainhomes.com

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Just Listed: Divide Home on 2.24 Acres with Breathtaking Views

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Welcome to Sherwood Forest Estates!!

This beautiful home offers breathtaking mountain views and a private one way road entrance to your front door. There is plenty of room for all of your toys. Grounds equipped for RV and boat parking. Mountain living at it's finest, this amazing home in Divide, sits above the city on 2.24 acres and offers VIP privacy. The location is minutes away from BLM land. The home features will not disappoint. You will be dazzled by the master bath. The master bath features a large garden-style tub, double sinks, and a separate shower. You can appreciate entertaining in the open concept style dining area and kitchen. Holiday gatherings are sure to be a hit!!! The lower level of the home is where all of the fun happens. This area features an open recreational area that will keep your guests entertained. Features a wood burning stove and wet bar. The outside of the home is breathtaking. The property is surrounded by beautiful trees galore. Just feet away from the home you will find yourself at the relaxing hub. Here you can sit and appreciate the outdoors. Welcome Home!!!

Listed by Wanda Wood for West + Main Homes. Please contact Wanda for current pricing + availability.

 
 
 

Have questions?
West + Main Homes
(720) 903-2912
hello@westandmainhomes.com

Presented by:
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(719) 287-6740
wanda@westandmainhomes.com

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Found The One? 10 Things To Do Before Making an Offer on a House

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The house hunting process is full of anticipation and excitement, and once you think you’ve found The One, it’s tempting to rush to make an offer and seal the deal before someone else scoops it up.

But wait! There are some things you want to consider before making an offer on a home that could save you a whole lot of time, money, and potential headaches down the road.

Here are some things to consider before making an offer to ensure that you get the best deal possible and that you’re not getting in over your head.

1. Hunt down the home’s history

You (and your real estate agent) should do a bit of sleuthing to find out the history of the property. You want to know how long the property has been on the market, if it’s truly a “new” listing, or if it was previously on the market within recent years.

Have your agent look at the history as far as the pricing goes to see if any reductions were made and if the property was ever under contract and came back on the market.

Beyond that, it’s always a good idea to have your real estate agent contact the listing agent before submitting an offer.

2. Fish around about finances

Make sure you know who owns the current property, when it was last purchased, and if there’s a mortgage or any additional loans taken out on the property.

To do so, you and your agent can check tax records, the property appraiser’s records, or court records if accessible in the county where the property is located. The seller’s flexibility may be affected by the amount owed on the property.

3. Probe permits

If you can access building department data, it’s worth a look to see if there has been anything done to the property over the years whereby a permit was pulled or not pulled.

4. Measure the market

Beyond the property you’re considering purchasing, you also want to do research on the state of the market for the neighborhood and area in which it’s located. That means looking at all the active, under contract and, especially, sold properties from the past year or so to compare prices.

Look at where the list price of the home you’re considering falls in relation to others on the market. Is it the most or least expensive property, or does it fall somewhere in between?

5. Investigate the housing inventory

The current inventory in an area can also be helpful when deciding what type of offer to make.

“Numerous homes for sale would indicate more of a buyer’s market in that particular area. For example, where sellers may be more willing to negotiate,” Ameer says. “If there are a lot of homes for sale, why? Are people wanting to leave for any particular reason? What percentage of the asking price are homes selling for? What are the average days on the market?”

Answers to these questions can help you craft your best offer.

6. Take a look at taxes

Beyond your mortgage payment, there are also taxes to pay on your property. While they vary by area, they can be pretty steep and you must factor them in when deciding if you can afford a property.

To start, review the current taxes as well as the estimate of the property taxes based on the new sales price to ensure you are financially comfortable with those costs. Also know that your property taxes can change each year based on a number of factors, so make sure your budget has a bit of cushion in case they increase.

7. Find out about fees

If you’re buying in a community that has homeowners association (HOA) dues or other fees, make sure you understand what those are and how often you will be assessed. You also want to make sure you understand what you’re getting for those fees, if any special assessments are planned, and if there are any other fees that will be charged to you at closing

8. Inquire about home insurance

Beyond your mortgage and taxes, there’s also the cost of home insurance to consider. Get an idea of how much the seller is currently paying for insurance and obtain quotes for a new policy if you purchase the home. Investigate whether there are any factors that could affect the insurability of the home, such as the age of the roof or other systems. Will anything along these lines need to be replaced to lower the insurance premium in the future?

9. Understand the cost of utilities and upkeep

Don’t forget to consider the cost of utilities and upkeep of a property. If you have a football field–size yard, can you maintain it yourself or will you need to hire help? If the home has a pool or other outdoor living features, how much will it cost to keep them maintained and in good working order? Is the home a fixer-upper, or can you just move in and enjoy it?

Ask to review a seller’s disclosure before making an offer. If the seller has not completed one, you can make your offer contingent on review of one being completed by the seller within a specified period of time. This will give you an idea of the age of major systems such as the roof, electrical, plumbing, HVAC, etc., which can be pricey to replace.

10. Dig in to day-to-day life

Beyond the finances, you also want to get a good idea of what your life will be like living in a particular home. That means looking at things like crime in the area, evaluating the local schools (even if you don’t have children, they can have a big impact on your future selling price), reviewing any homeowners association rules, and checking commute times to work and other places you go frequently. No one can give you a crystal-ball view, but with a little research you can get a good idea of what your day-to-day life may look like.

Keep reading on Realtor.com

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