A contractual right giving a party the first opportunity to buy or lease a property before the owner offers it to others.
Why Right of First Refusal matters on the exam
This term belongs to Contracts. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Right of First Refusal
Every Freehold question shows why the right answer is right — and cites its source.
If a valid option to purchase is not exercised within the time period stated in the agreement, the option:
Automatically renews for an additional term
Converts into a right of first refusal
Expires, and the optionor is free to sell to another party
Becomes an enforceable purchase contract by default
Show answer & explanation
Expires, and the optionor is free to sell to another party — An unexercised option simply expires at the end of its stated term, releasing the optionor from any obligation and allowing the property to be sold to anyone.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
A right of first refusal differs from an option to purchase primarily in that a right of first refusal:
Requires no consideration whatsoever, unlike an option, to bind the property owner
Automatically expires 24 hours after the owner receives any third-party offer
Obligates the owner to sell to the holder immediately at a price fixed when the right was first granted, whether or not the owner wants to sell
Gives the holder the right to match a third party's offer if and when the owner decides to sell, rather than a right to compel a sale at will
Show answer & explanation
Gives the holder the right to match a third party's offer if and when the owner decides to sell, rather than a right to compel a sale at will — A right of first refusal only becomes active if the owner decides to sell and receives an acceptable offer, giving the holder a chance to match it, unlike an option, which lets the holder force a sale within its term.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
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