Should I accept a First Right of Refusal when selling my home in Richmond, Va. ?

By
Industry Observer

Here in Richmond, Virginia getting a contract on a home is the first thing a listing agent wants for their client! But,with the current market, many sellers are reluctant to allow purchase offers with a First Right of Refusal. I think this is "poppycock"! If a buyer must sell their house before they can purchase another this must be allowed to get current homeowners moving!

Buyers have more negotiating power if they have as few contingencies to place in a contract as possible. They understand the best possible scenario for them is to come to the negotiating table with a huge down payment, no house to sell, and prequalified loan commitment. But that is not feasible for everyone! If you have specific needs in a home, and have been waiting to find the right house before putting yours on the market, a First Right of Refusal is the only way to go! Homeowners are willing to pay a bit more for the knowledge that they will have the house they want when they sell their home. So let's look at this a bit more:

What is a First Right of Refusal?

 A purchase offer with the First Right of Refusal allows the buyer the time to sell their home, knowing they have a house (we will call this the "desired home") to buy,  when their home sells. If another purchase offer is received on the "desired"  home , the buyer is given the opportunity to purchase the "desired" home without selling their home first. They are given a specified amount of time to make this decision (usually 24-48 hours), and can decide to release their contract  or agree to purchase.

What makes this a great deal for a seller?

First, a seller should never limit the buyers who may want to purchase their home by stating " I am not accepting First Right of Refusals". You want as many people,  qualified to purchase , to see your home as possible. After you receive an offer you can always reject it, but the key thing is get an offer!

Other reasons to accept a First Right of Refusal:

  • It is like a lay away plan. You have a contract in place, but are able to actively market the house to others.
  • Additional offers can be made on your property
  • It may make buyers , hoping you would lower your price, realize others are interested  helping  them get motivated to buy your home!
  • Although a First Right of Refusal contract must be disclosed in the MLS it should not stop other Realtor's from showing your home. Some buyer's agents may not show the house, but I don't think that is wise. All houses that meet a client's needs should be shown to a buyer.
  • A First Right of Refusal  gives a seller negotiating power. You should not accept as low of an offer as you would without a contingency.
  • A First Right of Refusal is a bargaining chip when requesting a higher Earnest money deposit.

What happens if I get two offers with a First Right of Refusal?

If you have already accepted one offer, the second offer can be held as a back up offer. Even if that offer is higher than the first, the contingency of selling the house has to be eliminated before the First Right of Refusal clause is activated.

Why would you reject the offer with a First Right of Refusal?

  • You don't like the asking price,  or can't agree on a selling price after a counter offer.
  • The buyer's home is not going to be priced to sell, or marketed in a way to sell as quickly as possible
  • It is a seller's market and there are more buyer's than houses on the market.

 What else should the seller be aware of?

  • Will the future buyer actively sell their home and lower the price if necessary to draw people in?
  • The Earnest Money Deposit should reflect the buyer's desire for the home. It should not be waived or delayed.
  • What is the future buyer's home like? Where is it located? How long has it been on the market? Your Realtor should see the buyer's homes and see if they feel the properties will be priced and marketed aggressively.
  • Minimize the hours for response time. But realize buyer's may need time (especially over a weekend) to contact their lenders for answers if another contract is presented.

Please visit my website at www.BettySellsHouses.com to search for homes on the market in Henrico, Richmond, and surrounding areas of Virginia.

Comments (1)

Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor: Commercial, Residential, Leasing, Invest

Great explaination Betty. More people should be more aware of this option.

Sep 02, 2010 11:16 AM