First Right of Refusal

[Analytical]

Has anyone ever been asked to put a value on a "first right of refusal" or know of a case where a party has been paid for the "first right of refusal"

 

[Lost Cause]

Interesting Question

I've never seen anyone put a value on a first right of refusal. I have never seen one transferred and suspect that, typically, they are not transferrable.

You might get a better response to this question in the Commercial subforum.

 

[Richard Carlsen]

When I was an active selling broker, I remember working with an investor on the purchase of a first right of refusal from a tenant to my investor, over the objection of the seller (owner), I might add. The gist of the owners argument was that a right of first refusal could only be exercised by the party to whom it was given. However, this one was not specific and in the end, the right of first refusal was considered a form of an option which is a form of ownership and therefore, transferable. As memory serves me, the fee paid was something like $750 cash on a $31,000 sales price for a 2 unit house that at the time had a MV of about $38,000. We even were going to have the tenant exercise his right of first refusal, enter into a purchase agreement and then transfer the rights of the purchase contract to my investor. The worse case scenario was to have the tenant buy the house and them immediately sell to my investor but that would have eaten up a lot of the profits of the deal.

I don't think there are any hard or fast rules or even rules of thumb for the value of a right of first refusal that can be transfered. I is whatever a buyer and holder can agree to at the time.

 

[Kevin A. Spellman]

I acquired a property with a first right of refusal here in MA. The buyer and sellers were at the closing table when the Attorney for the seller said Oops, need a waiver for the first right of refusal.

The real estate agent called me in the month of September and I acted dumb with the phone call. He sent over the waiver and not a copy of the sales agreement. I was not formerly notified with the sales agreement until December. When I was formally notified, I performed on the 60th day as it was written in the First Right of Refusal. The property was once owned by my wife’s family and she deeded through a will to a charitable organization and they held it for ten years and tried to sell without notifying my wife. The right of first refusal can go out to thirty years here in MA.

 

[Don Clark]

Bill,

This may not be exactly what you are looking for. But in Virginia when you sign a valid contract to purchase real estate you become the "Contract Owner" of that real estate. As such, you can sell the contract to someone else, offer the property for sale, and, unless prohibited by the terms of the contract, you can put a sign in the yard. It works very similar to a land contract. I have seen people seel their contracts, or, in many cases, bring their buyer to the closing table and as soon as the deed is signed and accepted by the new owner, hold another closing for the new buyer at the same closing table. Just for referrence, we do not do a closing in escrow. We still have a formal closing at a closing table. There are ways to do that without all parties being present such as when they have a lawyer or closing agent represent them at closing. Our attorneys do hande the deed to the purchaser to show acceptance, then take it back so it can be recorded. When that happens(acceptance), the property is sold.

I see many contract where the seller is not the owner of public record. What is going on is what I have described. I ask for and get a copy of a legal document that shows me they have a right to seel it. Otherwise I check NO for owner of public record.

 

[Terrel L. Shields]

The property was once owned by my wife’s family and she deeded through a will to a charitable organization and they held it for ten years and tried to sell without notifying my wife.

Organizations have a very short memory. I know two properties that are illegally occupied, one by a town. The deed clearly stated that if the building ceased being a public school it was to revert to the owner of the land. Instead the city has made a community center out of it. Another is a church where squatters live as a "parsonage". They are Pencostal Holiness but call it the "baptist" church because the deed specifies it as such.

Right of First Refusal is a sort of option. Typically an option will cost from 1% - 3% of the market value. This is one of those "appraiser judgment and skill" adjustments.

 

[Mike Boyd]

Wow! This sounds like a history lesson rather than relating to the current market. Or, just plain nostalgia. LOL