What Is the Right of First Refusal (ROFR) in Real Estate — And How Does It Work?

Buying and selling real estate can be a complex process, especially when additional clauses are in play. One of the most misunderstood yet crucial clauses in real estate contracts is the Right of First Refusal (ROFR). Whether you’re a buyer, seller, landlord, or tenant, understanding how a ROFR works could impact your property decisions in a big way.

In this comprehensive guide, we’ll break down what the Right of First Refusal is, how it functions in the real estate world, common examples, and the pros and cons for all parties involved.

What Is ROFR in Real Estate?

The Right of First Refusal (ROFR) is a legal agreement that gives one party—usually a tenant, family member, or investor—the chance to buy a property before the owner can sell it to someone else.

For example, if a seller receives an offer on their property, the ROFR holder gets the option to match that offer before the sale can proceed.

How ROFR Works in Practice

Trigger: Owner receives a bona fide offer.
Notification: ROFR holder is formally notified with full offer details.
Response Period: Holder is given a time limit (often 3–10 days).
Decision: The holder can match the offer and proceed with the purchase—or pass and allow the owner to sell to the third party.

Who Typically Holds ROFR?

Long-term tenants
Family members of the property owner
Adjacent property owners
Investors or business partners
HOAs or condo associations

Real-Life ROFR Example

Imagine you’re renting a home and your lease includes a ROFR. Your landlord decides to sell and accepts an offer for $300,000. They must first offer you the property at that price. You have 5 business days to respond. If you accept, you buy the house. If you decline, they can sell to the original buyer.

ROFR vs. ROFO vs. Option to Purchase

Term	When Triggered	Buyer Action
ROFR	After seller receives an offer	Can match offer
ROFO	Before seller lists property	Can make first offer
Option to Purchase	Anytime during contract period	Can buy at pre-agreed price

Benefits of ROFR

For Buyers:

First chance to buy
Avoid competition
More control over neighboring property

For Sellers:

Potentially faster sale
Maintains relationships (e.g., family, tenants)

Drawbacks of ROFR

For Buyers:

Short decision windows
May need to match unfavorable terms

For Sellers:

May deter third-party offers
Delays and added complexity
Potential to sell below market

What to Include in a ROFR Clause

Names of parties
Triggering events
Notification procedures
Response timeframes
Transferability terms
Term length (e.g., 3 years)
Dispute resolution process

Pro tip: Use a real estate attorney to ensure the clause is clear and enforceable.

Legal Considerations

ROFRs may need to be recorded with property deeds in some states.
Failure to notify the ROFR holder properly can lead to legal action.
If included in leases or HOA bylaws, they must be disclosed to potential buyers.

Negotiating ROFR Terms

Everything in a ROFR clause is negotiable. Common terms to discuss include:

Duration of the ROFR (1 year? 5 years?)
Exemptions, such as family sales
Whether the right is transferable to heirs or partners
Exact match of terms vs. price-only matching

Is ROFR Right for You?

You should consider a ROFR if you are:

Renting a property you may want to buy
Co-owning real estate with partners
Wanting to keep property within your family or investment group

You might want to avoid a ROFR if you are:

A seller seeking maximum market value
A buyer who doesn’t want existing contract restrictions

The Right of First Refusal is a powerful real estate clause that can either protect your interests or limit your flexibility—depending on how it’s used. For buyers, it’s a chance to secure a dream home or investment without open market chaos. For sellers, it offers potential peace of mind, but it comes with limitations.

Before agreeing to any ROFR clause, be sure to consult with a real estate professional and legal advisor. A well-structured ROFR can be a win-win—but a vague or outdated one can turn into a headache for everyone involved.

Need Expert Help?

Joanna “JoJo” Jones helps clients navigate every type of real estate contract. Whether you’re a buyer, seller, or investor, JoJo will make sure your interests are protected, and your deal goes smoothly.

📞 Contact JoJo Today!

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