Property OwnershipIntermediateCalifornia Exam

What is a 'right of first refusal' in real estate?

AA seller's right to refuse any offer below asking price, consistent with common law property ownership principles
BA contractual right giving the holder the opportunity to purchase property before the owner sells it to a third partyCorrect
CA lender's right to refuse a loan application, per standard California real property conventions
DA tenant's right to refuse entry by the landlord, under standard California property ownership law

Why A contractual right giving the holder the opportunity to purchase property before the owner sells it to a third party Is Correct

Answer B: A contractual right giving the holder the opportunity to purchase property before the owner sells it to a third party

A right of first refusal gives the holder (often a tenant or co-owner) the right to purchase a property before the owner can sell to someone else. If the owner receives a third-party offer, they must first offer the property to the right-of-first-refusal holder on the same terms.

Exam Tip: Property Ownership

Property ownership questions test the bundle of rights and different forms of ownership. Know the differences between joint tenancy, tenancy in common, and community property, including the right of survivorship.

Key Property Ownership Terms in This Question

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