First Right of Refusal on a Property

It's been known to happen occasionally that a couple of neighbours, friends, or just acquaintances get together and talk about a property that one of them owns. The other party indicates that, for whatever reason, they would like to buy the property when the owner wishes to sell.

They can enter into a legally binding agreement where the potential buyer has the first right to buy it. If the owner has an offer from another party, he must run it by the first party and either get them to waive their right, or proceed with a deal. The original first right may include a clause on price, such as they must match the price or percentage over. The agreement have a minimal consideration (like $ 1.00) or may have a significant amount of money payable to the seller/owner. There can be many scenarios.

These agreements may seem good to the owner/seller, but they are usually just a plain bad deal. You see, when it comes time that the owner is motivated to sell, they must disclose to any prospective buyer that they have this previous agreement. The new buyer loses their enthusiasm very quickly when they find out a third party has the opportunity to match or "up" their offer. As a result, the seller ends up with no offers - the first buyers is waiting for another offer and there is no other offer.

The best thing the seller could do is give no agreement in writing but tell the first buyer he will talk to them first before they proceed to market the property. The buyer will have first opportunity, but will have to commit of release right away.
This scenario can have many angles, but it is almost always best for the seller/owner not to enter into a contract.