What Is a Right of First Refusal in Michigan Real Estate?

Last fall I sat at a kitchen table in Hudsonville with a couple who had been renting a ranch on a half-acre for three years.Their landlord called and said he was selling.They panicked, then they remembered a single paragraph buried on page four of their lease: a right of first refusal.That one clause meant the owner could not just sell the house out from under them.He had to bring them the deal first.They had 72 hours to match it.They did, and they closed three weeks later at the same price the outside buyer had offered.

That paragraph is one of the most misunderstood tools in Michigan real estate.People confuse it with an option, they assume it sets a price, and they sign leases and purchase agreements containing one without knowing what it actually does.I am Holden Richardson, I sell real estate across Kent and Ottawa counties, and this is the plain-English version of how a right of first refusal works here, where it shows up, and what makes one hold up in court.

What a right of first refusal actually is

A right of first refusal, which I will shorten to ROFR, is a contract clause that says: before you sell this property to anyone else, you have to come to me first.The owner stays free to keep the home and never sell.But the moment they decide to sell and accept terms from a third party, those terms get handed to the ROFR holder, who gets a defined window to match them or walk.

The key word is refusal.You are not setting the price.You are reacting to a real, accepted offer that an outside buyer already put on the table.If a buyer offers $407,000 on a Hudsonville home and the seller would take it, the ROFR holder gets to say yes to $407,000 on those exact terms, or pass and let the outside buyer proceed.

How an ROFR differs from an option to buy

This is where most people go sideways, so I slow down here every time.An option to purchase and a right of first refusal are cousins, not twins.

An option gives you the power to buy at a price the two of you agreed on up front, on your own timeline, whether or not the owner ever wants to sell.You hold the trigger.If you have an option to buy a Caledonia property at $420,000 good for two years, you can pull that trigger any day inside the window and force a sale at $420,000, even if the market ran to $450,000.

An ROFR is passive until the owner acts.It only wakes up when the owner decides to sell and brings you a third-party offer.You do not pick the price and you do not pick the timing.The owner and an outside buyer set both, and you choose match or pass.Practically: an option is offense, an ROFR is defense.That distinction drives how I'd advise you to negotiate one, because an option is far more valuable to a buyer and far more dangerous to an owner.

The current West Michigan market, and why this matters now

Speed is the reason these clauses are live wires right now.The City of Grand Rapids is running a 9-day median to pending, 1.2 months of supply, and a 98.1% sale-to-list ratio, with a median around $304,000, up roughly 10% year over year. Grandville is sitting at a 9-day median, Hudsonville at 13, Jenison at 14. These figures are estimates from public aggregators, not MLS-certified, so treat them as directional.

When homes go pending in under two weeks, a 72-hour ROFR window is the difference between keeping a home and losing it.And bump clauses, the seller-side version, fire constantly because so many move-up buyers in Byron Center, Caledonia, and Rockford need to sell first.In a market this tight, the paragraph nobody read becomes the paragraph that decides the deal.

Where ROFRs actually show up in Michigan deals

I see them in four recurring places, and each one behaves a little differently.

Tenant rights of first refusal. This was my Hudsonville couple.A landlord grants the tenant a right to match any sale during the lease.It is a real perk for a renter who wants to eventually own the home, and it is the cleanest version because the tenant is already living there and knows the property cold.

Family and estate situations. A parent leaves a cottage to four kids but writes in that any sibling who wants out must first offer their share to the others.These show up in trusts and restriction agreements all over the lakeshore, from Holland to Zeeland to the cottages around Saugatuck.

Condo and association documents. Some associations reserve a right of first refusal on units.If you are buying in a building, read the master deed and bylaws, because the association may have the right to step in front of your purchase.

New construction and land deals. A builder selling you one lot in a development may keep an ROFR on the adjacent lot, or you may negotiate one so you can grab the lot next door later.With new-construction median list prices around $444,374 in this market, that future-lot right carries real money.

Bump clauses: the seller's version of an ROFR

A bump clause is a contingency in an accepted offer that lets the seller keep shopping.Here is the mechanics.A buyer makes an offer contingent on selling their current home.The seller accepts but keeps the listing active.If a second, cleaner offer arrives, the seller gives the first buyer notice, usually a 48-hour or 72-hour window, to remove the home-sale contingency or get "bumped" out of primary position so the seller can take the backup offer.

Functionally it is a right of first refusal pointed the other direction.The first buyer gets to refuse to lose their spot by waiving their contingency.I write and respond to these constantly because so many of my buyers in Byron Center, which carries a 31-day median, and Caledonia, at a 34-day median, need the proceeds from their current home before they can close clean. If you are the seller, a bump clause lets you accept a contingent offer without truly tying your hands.If you are the contingent buyer, you need to know going in that your spot is not safe.

What makes a Michigan ROFR enforceable

Here is the part that costs people money when they skip it.Michigan courts will enforce a right of first refusal, but the document has to actually create the right and survive two legal tests.

It has to be in writing, and the words have to do the work. Because an ROFR concerns an interest in real estate, Michigan's statute of frauds requires it to be written and signed.Vague language sinks it.In Gerstenberger Farms, Inc. v Grimes, the Michigan Court of Appeals held that a lease promising the tenant an "opportunity to purchase the property" did not create an enforceable right of first refusal. The clause needs to spell out the trigger, how notice is delivered, the exact response window in hours or days, and how the price is fixed.

It cannot be an unreasonable restraint on alienation. Michigan has a strong public policy against locking property up so it can never be sold.But a well-drafted ROFR clears that bar.In In re Estate of Virgil F.Hoppert, a published Court of Appeals decision dated June 29, 2023, the court held that a purchase right tied to a clear price mechanism and a finite duration was not an unreasonable restraint. The takeaway is direct: reasonable price, reasonable time limit, and you are on solid ground.

One more practical note.If you ever do litigate one, Michigan's limitations period for a written contract is six years under MCL 600.5807, and the clock generally starts when the right is breached. Do not sit on a violated ROFR.

A regulatory wrinkle two parties miss

Two things to flag.First, a payment made to a holder for waiving or releasing a right of first refusal is specifically carved out of Michigan's transfer-fee-covenant law under MCL 565.891, so paying someone to release their ROFR is not treated as a prohibited transfer fee. Second, your agent has a statutory duty.Under MCL 339.2512d, a Michigan licensee must exercise reasonable care and skill for their client, which in practice means disclosing a known right of first refusal in writing to anyone trying to buy the property. If a home you want is encumbered by an ROFR, you deserve to know before you waste an inspection fee.Worth pairing with the post-NAR rule that buyer representation agreements get signed before showings now.

What I'd do if an ROFR is on the table

If you are a tenant or buyer being offered a right of first refusal, take it, but get the window right.Seventy-two hours is standard here and gives you time to confirm financing.If you can negotiate an option instead of an ROFR, that is stronger, because you control the trigger and the price.If you are an owner granting one, keep the duration finite and the price mechanism clear so it stays enforceable under Hoppert and does not chill future buyers.

When the moment comes to actually match an offer, do not lean on an automated estimate.Ask me to run the numbers instead: I'll do the PITI on your terms and pull comparable sales on the specific home, so you know whether the third-party price is one you should match or let walk. My monthly Grand Rapids market report gives you the wider picture while we work. If you are still shopping and want to know what is encumbered or clean, ask me and I will tell you what is active right now, and there is a community-level breakdown over on the Hudsonville neighborhood page. Also note that whoever pays the transfer tax in your county is a separate negotiation that rides alongside all of this.

Most of the trouble I see with these clauses comes from people signing them blind.A right of first refusal is a genuinely useful tool when it is drafted with a clear trigger, a defined window, and a sane price mechanism.Have a question on a specific clause in your lease or purchase agreement?Ask me directly and I will walk you through what it actually says.

FAQ

What is a right of first refusal in plain English? It is a contract clause that says before an owner sells to anyone else, they have to come to you first with the terms they got from a third party, and you get a set window, often 72 hours in West Michigan deals, to match it or step aside.You do not get to set the price.You get to react to a real offer the owner already accepted from someone else, on the same terms.

How is a right of first refusal different from an option to buy? An option lets you buy at a price the two of you locked in up front, on your own timing, whether or not the owner ever wants to sell.A right of first refusal only wakes up when the owner decides to sell and brings a third-party offer.With an option you control the trigger and often the price.With a right of first refusal the owner and an outside buyer set the price, and you only choose to match it or pass.

Does a right of first refusal have to be in writing in Michigan? Yes.Because it concerns an interest in real estate, Michigan's statute of frauds requires it to be written and signed.Beyond that, courts here want the words to actually create the right.In Gerstenberger Farms v Grimes, a lease that promised the tenant an "opportunity to purchase" was not enough.Spell out the trigger, the notice method, the response window in hours or days, and how the price gets set.

Is a right of first refusal enforceable, or is it a restraint on alienation? It can absolutely be enforceable.In the 2023 Hoppert decision, the Michigan Court of Appeals held that a purchase right is not an unreasonable restraint on alienation as long as the price and duration are reasonable.Michigan disfavors locking up property forever, so an ROFR with a clear price mechanism and a finite life is the version that holds up.

What is a bump clause and how does it relate to all this? A bump clause shows up when a buyer's offer is contingent on selling their current home.The seller keeps marketing, and if a second clean offer comes in, the seller "bumps" the first buyer by giving notice, usually 48 or 72 hours, to drop the home-sale contingency or release the deal.It functions like a seller-side right of first refusal.With Grandville sitting at a 9-day median and Hudsonville at 13, bump clauses come up a lot here.

Should I trust a Zillow-type estimate when I'm deciding whether to exercise an ROFR? No.The decision to match a third-party offer is a real-money call, and an automated guess is not the tool for it.Ask me for a ZIP-level read and a PITI figure — I run both by hand — then I'll pull actual comparable sales on the specific home. You want the number that reflects that street and that condition, not a model average.

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