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How to write a letter of intent to purchase.
Use this nonbinding business letter to establish the details of a future transaction, such as a real estate purchase, before a binding agreement is crafted.
What is a letter of intent to purchase?
This type of letter of intent (LOI) can be used as a starting point for negotiating the basic terms of a purchase to ensure a fair deal for both parties. Details in the letter can include information about both parties, the purchase timeline, purchase price, payment method, and more. While a letter of intent to purchase is not legally binding, it can lay the groundwork for an official purchase agreement.
Benefits of LOIs for sellers.
As a seller, this type of letter can be an important step in your due diligence process; if a dispute arises down the line, it helps prove you were negotiating in good faith.
Benefits of LOIs for buyers.
While it won’t necessarily give the buyer exclusivity or guarantee the purchase for them, signing a letter of intent confirms their interest in the purchase and serves as a record of where they stand on the terms.
- Helps the negotiation process progress for both parties
- Saves time by exposing potential roadblocks to the transaction early
- Keeps transactions transparent and predictable for both parties
- Can help a potential buyer secure a loan for the upcoming purchase
Your letter may contain the following elements:
- Name and contact information of the buyer
- Name and contact information of the seller
- Detailed description of the items or property being sold
- Any relevant disclaimers or liabilities
- The total purchase price
- Method of payment and other payment terms, including dates
- A standstill order during which the seller won’t negotiate with other buyers
- Covenants and other contingent agreements
- Warranties and indemnifications and their expiration dates
Real estate letters of intent for commercial property.
Because of their complexity, commercial real estate transactions often begin with a buyer making an offer with a letter of intent to purchase. These can include additional clauses relating to real estate terms, such as where responsibility will fall for paying off outstanding loans and a list of any required repairs or conditions the seller must meet prior to the closing date.
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