A First Right of Refusal is a HOA regulation that allows members of the association to assume a Purchase Contract from a third party buyer without their or the Seller's consent. More simply put, if you make an offer on a condo with a First Right of Refusal a letter will go out to all owners in the HOA stating the terms and conditions in the contract. The owners in the HOA will then have a set period of time (usually 10-20 days) to decide if they want to purchase the condo instead of you. For an individual to exercise their First Right of Refusal, they will have to be willing to assume the current purchase offer including all of the terms and conditions set forth in the contract.
Essentially, the purpose of a First Right of Refusal is to offer some level of protection to owners in an HOA in the event that someone decides to sell below market value. For example, let’s assume you and your neighbor own similar condos that are worth $200,000. If your neighbor falls on hard times and needs to sell their condo fast, they may list it for sale under market value and accept a purchase offer for $170,000. If this happens it will adversely affect your property value so, you may want to exercise your First Right of Refusal and purchase the under valued unit yourself. By purchasing the neighboring unit, you become the beneficiary of the under priced sale despite the adverse affect on the value of your condo.
It is very important when purchasing a property in a HOA to know if there is a First Right of Refusal and when it expires. As a buyer, you don’t want to be spending money on inspections and appraisals just to have someone else exercise a First Right of Refusal and buy the property out from under you. As always, if you have questions about this or anything else pertaining to Summit County Real Estate, please feel free to contact me anytime at the information below.
All the best,
Tyler MacGuire e-PRO®, SFR
Broker Associate
Omni Real Estate Company
Office: 970-468-2740
“Your Guide to Summit County Real Estate”
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