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What is a Right of First Offer?

Want the first opportunity to make an offer on a property before it gets listed? Negotiate a right of first offer into your agreement. A right of first offer allows a potential buyer to make the first offer on a property within a given time frame, before the seller lists the property. The seller doesn’t have to accept the offer, and if refused the seller can go on to another offer. The seller can always go back to the holder of the right of first offer later, but the holder is then free to reduce their offer.

Right of First Offer Benefits

Who Should Use It?

A right of first offer is usually seen in the case of renting — both for commercial and residential tenants. A business may want the opportunity to expand when more suites become available in a commercial space, while a residential tenant may want to purchase the property they rent.

Benefits for Tenant/Buyer

This agreement gives the tenant an opportunity to make an offer on the property before it's listed or seen by anyone else. In the case of a residential tenant who loves the home they rent, a right of first offer gives them a chance to make it their own. The tenant can also benefit from this agreement by reducing, moving or relocating costs if the seller accepts their offer.

Right of First Offer to Buy a Home

Benefits for Seller

A right of first offer is ideal for many sellers because the owner has options before having to place their property on the market. It can also help reduce brokerage fees and marketing costs, saving time and money if the holder provides a good offer. If the owner has someone else in mind as a buyer, all they need to do is reject the holder’s offer which makes this agreement less risky for sellers.

Considerations

It's important to consider the advantages and disadvantages to a right of first offer. Think about things like timing. How much time does the buyer have to give an offer and is there enough time to get financing? How will the offer take place? What happens if the offer is not accepted?

Make sure to negotiate things such as deposits, warranties and consequences (such as if the seller accepts the offer but then the buyer is unable to obtain financing so the deal falls through) so that it's fair and beneficial to both parties. Lastly, if you are having trouble understanding any of the language found within the contract, seek legal advice before signing the contract.

Want more advice about all things home — including homebuying or selling advice? Nestiny is a great place for homebuyer education and to help you gauge how ready you are to buy a home. Journey Homeward allows you to enter all your wants and needs while the True Affordability Tool will break down your budget, showing what you can comfortably afford. You will also receive a Ready Report that will give you a vital head start in the home buying journey, saving you valuable time and money.

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Ready To Become A Smarter Homebuyer?

By signing up, you agree to Nestiny terms of use .
Whether you need a step-by-step guide, video resource or one of our many helpful tools, Nestiny has your back 24/7 for all things home buying and selling. You choose the pace, material, and when and where to learn. Unlock your free access to Nestiny today!
Are you a real estate professional? Go here .
By clicking this button, you'll enjoy free unlimited access to Nestiny and agree to our terms of use . And don't worry! Nestiny will not share your information with any parties without your consent.