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A
Contingency Sale is the way
things used to be done. This sale was when the
"Seller" of a property would take
his home off the market for an agreed upon period
of time in order to give the "Purchaser"
an opportunity to sell the "Purchaser's"
existing property. Many times the "Purchasers"
and "Sellers" would agree on a period
of 15 to 30 days to market the "Purchaser's"
home. Often the "Purchaser" of the
"Sellers" house was unable to sell
the contingent home. When this occurred, the
"Seller" would put his house back
on the market. The down side is that the "Seller"
lost a significant period of time he could have
marketed his home to other potential buyers.
A First Right of Refusal was
invented in order to allow the "Seller"
to keep his home on the market during the period
of time the "Purchaser" is trying
to sell his present home.
The First Right of Refusal
is a tool that allows a buyer to enter into
a contract to purchase his new home contingent
on him selling his present home.
The advantage of the first right of refusal
addendum for the buyer is that it allows him
to come to terms with the seller of the home
he is trying to buy. It gives him the opportunity
to put his present house on the market and sell
it.
While the purchaser puts his home on the market
for sale, the seller continues to keep his home
on the market.
Another advantage to the buyer is that when
a home has a first right of refusal on it, the
listing agent must tell all other agents who
want to show it that there is a "first
right" on the property. Often potential
purchasers pass on the opportunity to see the
house because they are not certain that after
they negotiate with the seller that they will
ultimately end up with the home.
The reason this could happen is that the first
purchaser who holds the first right of refusal
has the option to remove the contingency of
the sale of his present home and to present
the seller a loan approval that is not contingent
on the purchaser having to sell his present
home in order to close on his new home. Usually
in this agreement, the buyer is given a 24 or
48 hour period of time to remove this contingency
and to provide the non-contingent loan approval
to the seller. The down side to the buyer is
that he can lose his new home because someone
else was able to give the seller a contract
that did not include the necessity of selling
a home.
The advantage of the first right of refusal
to the seller is that they can have their cake
and eat it too. The seller is able to keep his
home on the market to attract another buyer.
If another buyer signs a contract, and they
don't have a home to sell, they can very likely
buy the house because more than likely the first
buyer will not be able to remove the contingency
of selling their home. Based on the first buyer
not being able to perform based on the first
right of refusal contingency, the seller will
be able to void the contract with the previous
buyer and proceed with the second buyer.
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