A first refusal is a bit nerve racking. You may really like the offer you receive from a Buyer but not fully understand what the First Refusal Clause means. I hope this explanation will help you.
The first refusal buyer (FRB) must remove all of their other conditions in order for us to grant the first refusal. We will insert a clause requiring the Buyer to list their home, on MLS, within 24 hours of acceptance of the offer.
The FRB will have 24 hours to remove all of their conditions should you receive a satisfactory second offer.
If you receive a second offer, they do not match the first offer price. It is a new negotiation and they will not know what was previously agreed. In the same sense, if the second offer is better than the first, the FRB does not need to match the second offer.
1) it shows the market that someone else loves your home
2) the building and septic inspections would be completed and paid for by the buyer so you would be aware of any shortcomings with the property
3) a first refusal usually commands a closer to list price deal
4) your agent works hard to have the other property sold as it means your deal would firm, your agent would first evaluate the likelihood of the back-up selling based on current market conditions and pricing and advise you of the risks involved
5) a second offer forces the first buyers to firm their offer or walk away but this is after the second buyers have waived all conditions
6) MLS still shows the property as Active so the public will still have interest
1) you cannot secure bridge financing with a first refusal as the bank considers it a conditional offer
2) some agents shy away from showing first refusals as they are afraid their buyers will fall in love with the property and then not be able to have it as the first buyers may firm their offer
3) you have to continue to show the home and market it
4) the back up property may not sell
5) some buyers will not want to make an offer, pay for a septic and for a building inspection at a cost of approx. $1000 and then lose the property. For this reason, sometimes the vendor offers to pay for the second buyer's inspections should they not be the successful buyers.
6) the agent sees the first refusal comments on MLS and will advise their Buyer accordingly
If you are faced with a decision regarding a first refusal take some time to fully understand the offer and ask questions of your trusted Realtor®