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First Right of Refusal Addendum

First Right of Refusal: The Almost Option to Buy

By John Nuzzolese

First RightOften, rental prospects ask questions like, "Will you give me an option to buy?". In today's economy they are also asking, "Is this home currently for sale?" or "Is this home in foreclosure?" They may ask these questions for a few different reasons.

I find the question, "Will you give me an option to buy?" is asked for two different reasons, depending on the prospect.
a. The prospect may really intend to rent your property and then purchase it, or
b. the prospect wishes to build credibility with the landlord (you) by posing as a potential purchaser, in order to pass your screening process.

The question, "Is the home for sale or in foreclosure?" is asked because we are all hearing horror stories in this economy about people who move into a property and are forced to move out of again in a short time. Are your tenants prospects worried that you might sell the property out from under them or that you might lose the house?

You can assure your tenants that they don't have to worry, by giving them a "First Right of Refusal" addendum with their lease contract. It tells the tenant that they will be given the opportunity to purchase your property first, before making it available to the rest of the market.

Having the First Right of Refusal as an actual addendum rather than a clause in the lease brings special attention to it and makes the tenant feel the value of the opportunity and the gesture.

Good Intentions and A Vested Interest Let's face it. Most people have good intentions and most tenants intend to buy someday. When you have a tenant who thinks he might own the home someday, you can bet he'll take better care of the property.

Some landlords have asked, "Am I obligated to sell to the tenant if I give them the first right of refusal?"
You are not obligated to sell your rental property, but if you decide to sell, you agree to offer it to the tenant before selling it to anyone else. The tenant would have to meet your price and your selling requirements within a reasonable timeframe that you and/or your attorney specify.




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