What is a “right of first refusal” in real estate?

A “right of first refusal” in real estate is a contractual agreement that grants a specified person or entity the opportunity to purchase a property before the owner sells it to anyone else. This means that if the property owner decides to sell, they must first offer the property to the holder of the right of first refusal under the same terms they would offer to other buyers. This arrangement benefits the holder by providing a chance to secure the property without competing with other potential buyers, often giving them a significant advantage in acquiring the property.

The other options represent distinct concepts in real estate. A warranty deed pertains to the legal documentation that transfers ownership of property and guarantees that the title is clear of any claims. A restriction on property usage refers to covenants or regulations that limit how a property can be used, which is unrelated to the purchasing rights of individuals. A tax incentive for buyers involves financial benefits offered to encourage property purchases, which is not directly linked to a buyer's right to purchase before the property is offered to others. Understanding the specific nature of a right of first refusal helps in recognizing its role in real estate transactions and negotiations.