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  • Writer's pictureAttorney Jason A Greller

What's the Difference Between a Right of First Refusal and an Option to Purchase in Wisconsin?

A Right of First Refusal and an Option to Purchase are both legal arrangements concerning the potential sale of a property, but they have different implications for the parties involved:

Option to Purchase:

  1. Exclusive right: An Option to Purchase is an agreement between the property owner (the seller) and a potential buyer. The seller grants the buyer the exclusive right to purchase the property at a predetermined price within a specified period.

  2. Option fee: The buyer typically pays the seller a non-refundable option fee for the right to purchase the property. The option fee may be applied toward the purchase price if the buyer decides to exercise the option and buy the property.

  3. No obligation: The buyer is not obligated to purchase the property during the option period. If the buyer decides not to exercise the option, they forfeit the option fee, and the agreement expires.

  4. Protects the buyer's interest: An Option to Purchase is often used in situations where the buyer needs additional time to secure financing, evaluate the property, or complete due diligence before committing to the purchase.

Right of First Refusal:

  1. Opportunity to match: A Right of First Refusal is an agreement between a property owner (the seller) and a potential buyer. The seller agrees to give the potential buyer the first opportunity to buy the property if the seller decides to sell. The potential buyer has the right to match the terms of any offer the seller receives from a third party.

  2. No option fee: Unlike an Option to Purchase, the potential buyer typically does not pay an option fee for a Right of First Refusal.

  3. Triggered by a third-party offer: A Right of First Refusal only comes into play when the seller receives an offer from a third party. The potential buyer then has a specified period to decide whether to match the third-party offer or let the seller proceed with the sale to the third party.

  4. Protects the potential buyer's interest: A Right of First Refusal is often used in situations where the potential buyer wants to ensure they have the opportunity to purchase the property before it is sold to another party. It is common in commercial leases, condominium associations, or other situations where a party has a vested interest in the property or surrounding properties.

In summary, an Option to Purchase grants the buyer an exclusive right to buy a property within a specific time frame, while a Right of First Refusal gives the potential buyer the opportunity to match any third-party offer the seller receives.

Please note that this information is for general informational purposes only and should not be taken as legal advice. Consult with a qualified attorney to discuss your specific situation and understand your legal options.

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