Listing a Property with a Right of First Refusal – Practical Pitfalls to Consider

Establishing the value of real property during a divorce can be complicated. When appraisals conflict and the parties cannot agree on price, one proposed solution is to place the home on the open market and allow buyer demand to set the value. The idea is simple: whatever a ready, willing, and able buyer offers becomes the benchmark for fair market value.

In some cases, one party may reserve a right of first refusal, allowing them to match the strongest offer and purchase the other party’s interest. On its face, this appears to be an efficient and equitable way to resolve a valuation dispute.

In practice, however, this approach can create significant legal, financial, and ethical challenges:

MLS Disclosure Requirements

Multiple Listing Service rules require transparency regarding a property’s status and any material terms that affect the sale. If a “buyer in waiting” has the ability to see competing offers and override them, that fact may need to be disclosed. Such disclosure can discourage buyers from submitting offers at all, reducing competition and potentially suppressing value.

Listing Agreement Obligations

A signed listing agreement is an employment contract with the brokerage. In many cases, commission is owed if the property is sold “or otherwise transferred.” If a buyout occurs after marketing has begun, the parties may still be responsible for brokerage compensation—effectively turning the listing into an expensive method of valuation.

Offer vs. Final Sales Price

An initial offer is rarely the final number. Negotiations, counteroffers, inspections, appraisal contingencies, and repair credits all shape the ultimate purchase price. If a right of first refusal is triggered by the highest offer rather than the fully negotiated contract price, the financial gap can be substantial.

Occupant Interference

When the spouse residing in the home is also the one intending to exercise the buyout right, conflicts of interest arise. Limited showing access, poor property condition, disruptive conduct during tours, or discouraging commentary to prospective buyers can dampen demand. Even subtle interference may impact perceived value and distort the market’s response.

Net Proceeds Uncertainty

True value is not determined until inspections are completed, repairs negotiated, and appraisal issues resolved—often deep into escrow. Triggering a buyout prematurely may not reflect the property’s real, net market value.

Contractual Liability

Once a purchase agreement is signed, cancelling can be difficult and legally risky. Any right of first refusal must be carefully structured to avoid compounding liability for the parties.

Ethical Concerns

Buyers and their agents invest significant time, energy, and financial preparation when pursuing a property. Using the open market solely as a valuation tool—when a buyout is likely—can unintentionally waste the efforts of third parties who are unaware they are participating in a dispute-resolution strategy.

While determining fair market value is often challenging, engaging neutral professionals—such as an experienced appraiser, a CDRE®, inspectors, and contractors where appropriate—can provide a more reliable and cost-effective path to resolution without exposing the parties to unnecessary risk.

If you need a neutral real estate expert to help evaluate options or facilitate productive discussions, I’m happy to connect and assess how I may assist.