Brian, Home Buyer in Rhode Island

Is there a typical fee for granting Right of First Refusal on a property?

Asked by Brian, Rhode Island Mon Mar 3, 2008

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I'm not a lawyer, so this isn't legal advice. But...

There are a number of ways for setting up a "right of first refusal" on a property. And everything's negotiable. So, in any case, there isn't a "typical fee."

If one were setting it up as an option, which is a technique I'm familiar with, typically there'd be some sort of "consideration," which is usually a fee.

However, the value of the option, and thus the amount that the seller would ask for the option fee, could vary. Here are two scenarios: You find a property that is probably worth $100,000 today, in today's market, in its present condition. The owner is willing to sell it for $80,000.

Scenario One: You might want a short-term option, say 30 days, to tie the property up, then find someone else who'd like to buy it for $90,000. You might pay the owner $500 or $1,000 for a 30 day option. Remember: Everything's negotiable.

Scenario Two: You might want a long-term option, say 3 years. Your strategy, again, is to tie the property up and hope that in 3 years the value increases above $100,000. The owner knows that, too, and requires a larger option fee.

In either case, the option gives you the right to purchase the property...but not the obligation. Same as a right of first refusal would. You'd want the option to be assignable--that is, transferrable to another party. And the owner might seek a higher option fee in return for transferrability. Again, it's all negotiable.

Hope that helps.
1 vote Thank Flag Link Mon Mar 3, 2008
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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No just make sure to document all terms and conditions in writing.
0 votes Thank Flag Link Thu Mar 7, 2013
I've never heard of anyone charging a fee simply for first right of refusal. That's not to say it can't be done, I suppose it's all a negotiation. With first right of refusal the idea is the person with it just get the first option to buy at the then market rate.

There are instances where a seller charges a fee for an option, but this includes an agreed upon price and time.
Web Reference: http://www.alaynaberek.com
0 votes Thank Flag Link Mon Mar 3, 2008
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