First Right Contingency Offers – Explained

A First Right Contingency offer is made by a buyer. It’s harder to get one accepted in this unprecedented Seller’s Market, but not unheard of. Most “move up” buyers have a home to sell in addition to buying a home and that’s where the First Right can come into play.

What is a First Right Contingency?

There are a decent amount of people in this situation.  They can’t list their current home until they have an accepted offer on their next home. They can’t afford two mortgages so what can they do?

This is where a First Right Contingency offer comes into play. Your Realtor writes an offer on the home you want to purchase laying out all the terms of the offer in the contract.

In addition to the normal terms of price, possession, inspections, surveys and so on, the buyer will also disclose that this purchase agreement (for property #1) is contingent on them accepting an offer and closing on the sale of their current home. This information is included on the Purchase Agreement offer and spelled out more specifically in the addendum contract titled “First Right Contingency.”

First Right Addendum (from the buyer’s perspective)

On that form, your Realtor will disclose the address of your current home (property #2) and name a timeframe in which you have to accept an offer on that home. That time period is typically 14 days to 30 days but can be any amount of time the two parties negotiate. We’ve seen them as far out as 90 days in a Buyer’s Market!

Lifting the Contingency

The First Right can be lifted when the buyer accepts an offer on their current home. The buyers purchase of the sellers’ home will now be contingent on that transaction closing.

In addition, the Addendum also spells out what happens if you (the buyers) have not accepted an offer on your current home yet (property #2) but the seller of the home you are trying to purchase receives another offer.

There is a line in the Addendum saying, “Buyer shall have ______ hours after receipt of written notification, to exercise Buyer’s first right to purchase… by removing the contingency regarding the sale of property #2, in writing.”

At that point, the number of hours listed in the blank will begin. If the buyer’s lender approved them to carry two mortgages, the buyer can simply remove the contingency and the purchase of the sellers home will proceed without a contingency.

If the buyer is not approved by their lender to carry two mortgages and they have no other way to lift the contingency, their Purchase Agreement for the seller’s home becomes null and void and the seller is free to accept another offer.

Contingencies in a Seller’s Market

First Rights help buyers be able to make an offer on their new home contingent on selling their current home. This is especially important when you don’t have an interim place to stay between selling your home and buying another.

However, in a Seller’s Market, it’s a lot harder to get a First Right accepted. There are tons of buyers out there and not enough homes to go around. Most sellers will favor offers that do not have such a contingency.

Working with a Realtor like The Real Estate Pros team can up your odds of negotiating this type of offer. We’d love to listen to your situation and guide you through the transaction(s). It’s what we do!