Definition
This gives you the right to match any offer the seller receives before they can accept it. It's valuable if you want security without full commitment to purchase.
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Right of first refusal (ROFR) gives priority to buyer: if owner receives offer from someone else, must offer to ROFR holder at same terms. Example: tenant has ROFR on rental property. Owner wants to sell to investor at $400k; tenant has right to match offer ($400k) or get passed over. ROFR is valuable: gives occupant security (can't be forced out without right to buy). Differs from option: option gives right to buy at predetermined price; ROFR gives right to match third-party offer. ROFR requires timing: if owner receives offer, must notify ROFR holder, give time to match (usually 5-10 days). If ROFR holder doesn't match, owner can sell to third party. ROFR can be problematic: complicates sales (owner must notify potential buyer that ROFR exists; might deter buyer). ROFR is common in: tenant rights, partnership agreements, family arrangements. Understanding ROFR: if holder, valuable protection; if owner, limits marketability.
Pro Tip
Monitor ROFR carefully. You might miss the opportunity if owner's offer notification isn't clear.
Example
Commercial tenant has ROFR. Landlord wants to sell to investor. Tenant must be offered property at same terms; if tenant doesn't match, investor can buy.