Real Estate Contract – Right of First Refusal – Who Benefits?

By
Real Estate Agent with Marc It Sold!

real estate contractThis post came about because of one by Jessica Horton entitled, "Why put a carton of milk on layaway when your old dairy cow doesn't have any takers?"  In it she discussed about receiving a lot more real estate contracts as of late with contingency clauses for the sale of a buyer's home with no kick-out clause.

Let me preface this by stating that I make it a point to follow-up and follow through.  From the get go I get the buyers information in regard their lender, etc. and put calls through until I hopefully get more information back.  For the many that have come to know me, I do not like surprises and I can only gather that my sellers would not be too thrilled with them either.

Considering the present market conditions, I will not take a home off of the market if there is a contingency clause for the sale of the buyer's home.  For the purposes here, I'm assuming the fact that the buyer's home is already listed with a real estate professional and priced accordingly for the market.  Granted, I would prefer it to be under contract and then obviously feel better about the situation.  Of course if that was the case, I would respectfully request all the information as to their buyer's lender and follow through on that as well. 

The reason that I'm writing this is not as much in regard to what's just been written, but more so to how this affects your seller's home being shown after the contract is executed. 

I have found that the majority of the time the home is basically passed over for consideration and that the showings generally cease or slow to a trickle at the most.  I'm not aware of other MLS's, but in the Mid-Florida Regional MLS we can keep the home ‘active' but the first thing that has to be mentioned in the public remarks section is that you have a ‘Contingency Contract' and I usually add that it's a ‘Right of First Refusal' with a certain number of hours denoted.  This appears to essentially take the home off of the market.

With the number of homes available in today's market I have to wonder if our seller's are hindering themselves by accepting some of these contracts.  Like I've said I try to do my homework, but what about the person that does not?  I try not to talk negatively in regard to others in our profession, but are they performing a disservice to their client? 

 

For more information on Central Florida real estate and Central Florida homes for sale in addition to Central Florida relocation contact Marc Grossman, your Central Florida Realtor @ 407-463-1034.  Additional information is available for Seminole County real estate and homes for sale, Orange County, West Volusia County and South Lake County.

Central Florida Real Estate Specialist - Marc Grossman, GRI - Marc It Sold!To learn more about Marc and the services he has to offer, visit his profile & website

Marc Grossman, GRI  -  http://www.OrlandoHomes-4u.com/  -  407-463-1034

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Marc It Sold!

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Rainmaker
293,283
Mark Horan
Resident Team Realty, LLC & Toni's Property Management LLC - Saint Cloud, FL
"The Resident Chef" - Resident Team Realty LLC &
Marc- Your right. Most  Realtor pass. I always inquire about the offer that's pending. I also don't like the way our MLS does it. It is just like putting it pending.
Dec 18, 2007 01:14 PM #3
Rainmaker
204,202
Jennifer Monroe
Savvy + Company Real Estate - Charlotte, NC
Real Estate REALTOR®/Broker in Beautiful Charlotte
Agred Marc. I almost never do this unless the transaction is tight. A funny thing is that at an MLS meeting recently, someone asked how many knew what it meant (in our market, it's called Bumpable Buyer) and few did. Just goes to show....
Dec 18, 2007 01:21 PM #4
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker

Mark - I totally agree, just don't know what other way they would go about it.

Jennifer - Wow!  I guess that amazes me and I don't understand that!  I like that term, 'Bumpable Buyer.'

Dec 18, 2007 02:46 PM #5
Rainer
75,169
Christopher Myers
Orlando Property Group at Keller Williams - Lake Mary, FL
Lake Mary & Orlando Real Estate, Central Florida,

Marc, I have to admit, I'm one who would pass it up.  There are so many homes on the market right now, I don't want to get my buyer's hopes up, and waste their and my time on a home with a right of first refusal.  There are easier pickins out there by the bushel! 

As a listing agent, I don't like taking them, just for the reason mentioned above.  But, in this market again...there are a limited number of buyers and if the price is right and the term is short, it's tempting for sellers.  Tough call to make!

Dec 18, 2007 04:43 PM #6
Rainmaker
371,441
Lisa Heindel
Crescent City Living LLC - New Orleans, LA
New Orleans Real Estate Broker
Marc, once we accept a contract from a buyer, we are required to change the status in our MLS.  In this case, it would be to "O" for Open Predication.  I have never seen a predicated offer without a time limited clause in the event another acceptable offer comes in.  Most of ours are only 48 hours for the predicated buyer to either cancel or remove the predication.  I do know that buyer's agents skip right over the listings with an "O" for status.  There are way too many other houses on the market that are ready to write on to have to deal with waiting for another buyer to cancel before you can get an acceptance.  To me, it's basically like putting in a back up offer.  Holds up my buyer, when I could be showing them other properties we can close on quicker.
Dec 18, 2007 04:46 PM #7
Rainmaker
98,976
Patricia "Pattie " Romano
RE/MAX AT BARNEGAT BAY- - Manahawkin, NJ
Your HomeTown Realtor 609 312-9043

Marc,

most contracts presented in my area are out of towner's, so before I even have my sellers consider an offer with a home sale contingency, I want to see that the buyers home is actively listed, I make every attempt to contact the other agent to see what the market is doing in their area.  We do not have to change anything in our MLS, Thank Goodness!

but I will say this, there are numerous agents in my area that have no clue as to what a 72 kick out means.

Dec 18, 2007 06:33 PM #8
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker

Christopher - I couldn't agree with you more and that is where I stand as well! 

Lisa - Yes, we generally use either 48 or 72 hours.  But you are exactly right and that is what I do.  As I'm going through the plethora of listings for a buyer, it will just click onto the next property if one has a contingency contract attached to it.

Pattie - Good work!  That's what I feel a realtor should do for their seller.  So, if you don't have to change anything in the MLS, do you have to denote it somewhere in the description that there is a contingency contract on that particular home?

Dec 18, 2007 07:21 PM #9
Rainmaker
98,976
Patricia "Pattie " Romano
RE/MAX AT BARNEGAT BAY- - Manahawkin, NJ
Your HomeTown Realtor 609 312-9043

Marc,

actually we are NOT required nor is there an option on our MLS to do that, When an agent calls my office for availability, It merely says (Offer & acceptance- Home sale ) CONTINUE to Show- usually I get a call from the agent directly  to try and feel me out..

Dec 18, 2007 09:09 PM #10
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker
Pattie - That I like, especially from a listing point of view.  I'm sure some would still not show, but there would be others that I feel would still go ahead and show it.  Because they've already given it to the client and they've selected these homes to preview.  Wish they did that down here.
Dec 19, 2007 08:03 AM #11
Rainmaker
148,436
Tom Plant
WINEormous.com - Murrieta, CA
Marc - In California, once a home goes into escrow, it must going into either pending or backup. You can't keep it in  active.
Dec 19, 2007 04:11 PM #12
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker
Tom - Thanks for that info!
Dec 19, 2007 05:42 PM #13
Rainmaker
709,975
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F
I would pass up a house like this as well.  Why deal with a property that you might not be able to sell anyway?  As for contracts with these sort of contingencies, I recommend my sellers not to accept them unless the buyer can show that their home is sale pending already.  Anything less than that is really just a wish and a prayer and not a real buyer.
Dec 19, 2007 08:08 PM #14
Rainmaker
42,120
Teri Deane
RE/MAX 100 - Columbia, MD
Realtor, ABR, CRS, SFR - The Deane Team

When a property is "pending" our MLS requires the CKO (contract kick out) designation.  With the heavy inventory of homes in this market, I doubt many agents run searchs for "active" and "cko."  Personally, I only take buyers to a CKO home if it's in a neighborhood that they really want and there aren't many other homes for sale there.  I've also noticed that buyer's love these homes.  Human nature perhaps -- if you can't have something, it's way more desirable!  Or maybe, if someone else wants it, it must be great!

How about using this as a sales tool to knock those "on the fence" buyers off the fence and get them back in gear! LOL!

Dec 19, 2007 09:45 PM #15
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker

Rob - I have to agree with you.

Teri - Interesting, I'll have to think about that!

Dec 20, 2007 06:42 AM #16
Rainmaker
913,929
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate
Marc - I agree with you completely. An offer with a home sale contingency is NO OFFER. The seller and yourself lose complete control of the process. They benefit nobody but the buyer. I had a post featured in the RE/MAX times about this very issue. Good advice Marc.
Dec 20, 2007 02:32 PM #17
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker
Bill - Thank you very much.  See we do agree on some things!  :)
Dec 20, 2007 03:21 PM #18
Rainmaker
1,266,584
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

Marc, To answer your question, I can say nobody knows what it means because a contingent offer in our MLS does not say it is a contingent offer. It states that the status has been modified. Which is confusing to lots of agents.


Dec 24, 2007 12:08 PM #19
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker
Elizabeth - Totally understand.  Well if that's the case, I wouldn't mind taking them 'all day long' as well.  I wonder why your Board and MLS system decided to do that instead of denoting it moreso.  Even though I wouldn't mind my system doing the same thing. 
Dec 25, 2007 08:11 AM #20
Anonymous
Anonymous

Can a first right of refusal be bumped by another first right? If first right 1 has a contingency requiring selling their home to by the other, can first right 2 also subit a first right with the same contingency,but at a higher price and bump first right 1?

Aug 15, 2008 04:25 PM #21
Rainer
208,738
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker

Anonymous - In answer to your question - Yes!  Just because a price is higher, does not necessarily make it a better offer.  There are too many factors to be taken into consideration.

Aug 19, 2008 06:22 PM #22
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Rainer
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