What is the effect of a "right of first refusal" in real estate?

A "right of first refusal" is a contractual agreement that grants a specific individual or party the opportunity to purchase a property before the seller can sell it to another buyer. This means that if the owner decides to sell their property, they must first offer it to the holder of the right of first refusal on the same terms they would offer to a third party. This arrangement provides the holder with a priority position in acquiring the property, ensuring they have the first chance to make the purchase.

This mechanism is advantageous for buyers who are interested in the property, as it allows them to negotiate a sale without the pressure of competing offers and gives them a degree of control over the potential sale of the property. The agreement does not necessarily prevent the seller from selling the property; rather, it establishes a sequence in which offers must be considered, thereby facilitating a more favorable environment for prospective buyers.