A Right of First Refusal, or ROFR, provides specific individuals the first chance to buy a property before it hits the open market. It can also be referred to as a first right of refusal.

While it might sound complicated, understanding ROFR can certify you as a buyer and help you navigate the real estate market effectively.

ROFR in Massachusetts can be a double-edged sword for both buyers and sellers. On one hand, it offers stability and security. Buyers gain access to homes before they become publicly available, while sellers can prioritize a sale to a known party.

On the other hand, ROFR can present challenges. Buyers might face competition from the rights holder, and sellers could experience delays or limitations in finding the best buyer.

The recent implementation of Massachusetts’s Tenant Right of First Refusal (TOPR) law adds another layer to the ROFR landscape. This law grants tenants in specific multi-family properties the right to purchase their units before a public sale.

TOPR promotes affordable housing but reshapes the market for buyers and sellers.

From thirty eight years of experience in the real estate industry many Massachusetts buyers and sellers do not completely understand a right of first refusal. It is an essential topic to understand when buying or selling, so always seek professional assistance when necessary.

Next, let’s explore ROFR’s different types and critical components.

What Does the Right of First Refusal Mean?

What is a Right of First Refusal in Real Estate

What is a Right of First Refusal in Massachusetts Real Estate?

So, you’ve encountered a property with a Right of First Refusal (ROFR) in Massachusetts. Don’t worry; we’ll break it down for you!

Here’s what you need to know:

Different Types of ROFR:

There are three main types of ROFRs you might encounter in the Bay State:

  • Tenant ROFR: Applies to specific multi-family units, giving tenants the first crack at buying before a public sale.
  • Co-owner ROFR: Ensures fairness between co-owners by allowing one to match an offer before the other sells their share.
  • Manufactured Housing Community ROFR: Grants residents the right to buy the entire community if the owner wishes to sell.

Critical Elements of a ROFR:

The following are the core components of a typical ROFR in Massachusetts:

  • Notification: The owner must write to the rights holder about their selling intention.
  • Time: The rights holder has a specific timeframe, usually 30-60 days, to exercise their rights.
  • Matching Requirements: The rights holder may need to match the exact terms of the buyer’s offer, including price and closing date.
  • Negotiation: The buyer and rights holder can negotiate a mutually agreeable price and terms if necessary.
  • Exceptions: Specific circumstances where the ROFR might not apply, such as sales to immediate family members or government acquisitions.

ROFR vs. First Refusal Option (FRO):

It’s important to differentiate between an ROFR and an FRO. An ROFR is binding, meaning the seller cannot sell the property to anyone else if the rights holder exercises their right.

An FRO, on the other hand, is merely an option. The seller is free to reject the rights holder’s offer and proceed with the sale to someone else.

Implications of ROFR for Buyers in Massachusetts

As a buyer in Massachusetts, encountering a property with a Right of First Refusal (ROFR) can bring excitement and anxiety. Let’s review the advantages and challenges you might face.

Advantages of a ROFR:

  • Early bird gets the worm: Secure the property before it becomes available to the public, potentially giving you a head start in competitive markets.
  • Saving you some green: If the rights holder isn’t interested, you might negotiate a lower price, especially for motivated sellers.
  • Building a stable market: Contribute to a more stable housing market by prioritizing existing tenants or co-owners.

Challenges to Be Aware of:

  • Competition on the horizon: Prepare to compete with the rights holder for the property.
  • Delays and roadblocks: Closing might be delayed if the rights holder decides to exercise their rights.
  • Price pressure: You might experience pressure to negotiate a price closer to the seller’s offer, especially if the rights holder isn’t keen on buying.

Mitigating The Challenges:

  • Seek legal counsel: Consult with a local real estate attorney to understand the specific terms of the ROFR and your rights as a buyer.
  • Financing matters: Obtain pre-approval for financing to demonstrate your financial stability and ability to purchase.
  • Clear communication: Keep the lines open with the rights holder, communicating clearly and promptly throughout the process.

While ROFRs can add complexity to the buying process, understanding their implications and taking proactive steps can help you navigate the situation successfully.

Additional Tips:

  • Build a strong relationship with the rights holder: Positive and transparent communication can benefit both parties.
  • Be patient and persistent: The process might take longer than usual, so prepare to be patient and persistent while staying focused on your goals.
  • Have a backup plan: Consider having a backup property option in case the ROFR situation doesn’t work out. When buying a house in Massachusetts, you never want to limit your options.

Implications of ROFR for Sellers in Massachusetts

As a seller in Massachusetts, offering a Right of First Refusal (ROFR) can present advantages and challenges. Let’s explore the benefits, potential downsides, and helpful tips to navigate the process effectively.

Benefits of offering a ROFR:

  • Sell to someone you know: Prioritize selling your property to a familiar party like a tenant or co-owner, potentially fostering goodwill and building trust.
  • Less hassle, more peace: Avoid the constant stream of showings and open houses, making the selling process smoother and less disruptive.
  • Potentially faster sale: If the rights holder decides to buy, you could close the deal more quickly and avoid the uncertainty of the open market. It’s an enticing tool for those homeowners who want to sell fast.

Challenges to consider:

  • Closing delays: Be prepared for potential delays if the rights holder exercises their right and needs time to secure financing or satisfy other conditions.
  • Price limitations: Negotiating a higher price might be difficult if the rights holder isn’t interested in buying.
  • Limited buyer pool: Offering an ROFR in Massachusetts might attract fewer potential buyers, potentially impacting the final selling price.

Navigating the challenges:

  • Seek expert advice: Consult with a real estate agent experienced in the rights of first refusals in Massachusetts to develop a strategic pricing plan and marketing approach.
  • Transparent terms and conditions: Clearly outline the ROFR terms in the listing agreement, including the notification process, period, and matching requirements.
  • Set a deadline: Establish a reasonable deadline for the rights holder to respond to your offer, ensuring a timely decision and avoiding delays.

Additional tips:

  • Communicate effectively: Keep the rights holder informed throughout the process and address any questions or concerns they might have.
  • Stay flexible: Be prepared to adapt your pricing and negotiation strategies based on the rights holder’s response and market conditions.
  • Consider alternative options: Explore other marketing channels and pricing strategies to attract additional buyers if necessary.

Taking the Right Step: ROFRs and Your Massachusetts Home Journey

Right of First Refusal (ROFR) can play a significant role in the Massachusetts home buying process for buyers and sellers. Understanding its implications is crucial, whether you’re securing your dream home before the competition or navigating the sale of your property.

For buyers, ROFRs offer a chance to secure a property before hitting the open market, potentially at a lower price. However, they also come with the challenge of competing with the rights holder and delays in the closing process.

Sellers may benefit from prioritizing a sale to a known party and avoiding open houses, but they face potential delays and price limitations due to the ROFR.

Seeking professional advice from a real estate attorney or agent can equip buyers and sellers with the necessary knowledge and strategies to navigate ROFRs effectively.