on properties without all of the pages of legal terms and clauses associated with a 10 to 20 page sales contract. It is supposed to get the owner to agree on basic terms before the negotiations start. The LOI typically includes the buyer’s information, price, earnest money, financing terms, closing date, and any special circumstances. It measures the motivations of each party and ends any misunderstandings about either party’s goals. This isn’t a legal contract or offer in any way. It is completely non-binding. Specific legal terms may be mentioned but not in a final way. Once these general guidelines are fully illustrated and signed by each party, a binding contract can then be drafted for purchase. This is the step before that, and you may have to send a few LOIs.
IMPORTANCE OF THE LOI
Buildings don’t stay on the market long in today’s market. When you get near the end of your search and find a location that you like, along with a space that fits your needs, the letter of intent is the fastest way to start negotiations and get the first offer in. First, this shows the owner that you are serious and have your sights set on their space. It can build trust as well. Even though it is not legally binding, it creates a realistic start to the buying and selling process where both parties will respect any agreement and uphold it. It can encourage the seller to end marketing for the property for a week or so while a legal purchase draft is negotiated or crafted. Plus, the letter is early enough in the process to work out any disputes, and not set anyone back because of them. If the terms are close and each party is agreeable, the buyer could even visit the property a second time and start due diligence by reviewing
114
Powered by FlippingBook