What is the Letter of Intent in Real Estate?
A letter of intent in real estate (LOI) is a critical document used to outline key terms in business transactions before drafting a formal contract. Whether you’re looking for a real estate letter of intent sample, wondering “Is a letter of intent to purchase real estate binding?”, or seeking to negotiate in good faith, this guide will walk you through its purpose, structure, and legal implications.
A LOI in real estate letter that states your intent to purchase property and serves as a non-binding or binding preliminary agreement between buyers and sellers. It establishes the framework for the proposed transaction, including the purchase price, lease terms, closing dates, and due diligence period before signing a legally enforceable contract.
While typically a non-binding LOI, some provisions, such as confidentiality, exclusivity, and dispute resolution clauses, may be legally binding and enforceable. Understanding these distinctions is crucial when structuring a letter of intent real estate sale.
When making an offer on a property, there are two primary approaches:
Submitting a Purchase and Sale Agreement (PSA)
Using a Letter of Intent Real Estate Sale
A binding letter of intent real estate can simplify negotiations and set clear expectations, ensuring a smoother transaction process.
A Letter of Intent (LOI) sets the groundwork for a real estate deal. While typically non-binding, a well-crafted LOI communicates serious intent, clarifies key terms, and protects both buyer and seller from future misunderstandings before a formal Purchase and Sale Agreement (PSA) is drafted.
Here’s what a strong LOI should include:
Clearly identify both parties involved in the transaction.
Full legal names of the buyer and seller (individual or entity)
Entity type (e.g., LLC, trust, partnership)
Mailing addresses
Phone numbers and email contacts
Legal representatives (if applicable)
Tip: If the buyer is forming a new LLC or syndication group, the LOI should note that it may be assigned to that entity once formed.
State the proposed offer amount and how the buyer intends to fund the purchase.
Total proposed purchase price
Cash vs. financing breakdown
Contingency upon obtaining financing (yes/no)
Earnest money application toward final price
You can also mention if the deal is being structured with seller financing, assumption of existing debt, or other creative terms.
Outline the buyer’s right to investigate the property prior to closing.
Start date and duration of due diligence (commonly 15–45 days)
Access rights to property records, leases, financials, inspections, surveys, and third-party reports
Buyer’s right to terminate based on findings
Note: In 2025, due diligence often includes environmental screening (Phase I/II), ESG compliance, and insurance quote review due to rising premiums.
Set expectations for key milestones and the final closing date.
Timeframe from LOI acceptance to executed Purchase Agreement (e.g., 5–10 business days)
Length of time after due diligence to close (e.g., 30–60 days)
Extensions (if applicable), and who pays for them
Specify if closing is contingent upon any third-party approvals, appraisals, or lender conditions.
For properties with tenants, this section defines expectations about in-place leases.
Overview of existing lease terms and tenant obligations
Whether leases will be assigned or terminated at close
Buyer’s rights to review estoppel certificates and lease abstracts
Seller’s responsibility to deliver current rent rolls and tenant payment history
Detail the amount of good-faith money the buyer will submit, and under what terms it is refundable.
Deposit amount (often 1–3% of purchase price)
When and where the deposit is to be held (e.g., escrow account)
Conditions for refund or forfeiture
Triggers for deposit to go “hard” (non-refundable), such as end of due diligence
Clarify if and when the buyer may assign the rights of the LOI or Purchase Agreement.
Assignment to affiliated entities (e.g., LLCs or syndication groups)
Whether third-party approvals are needed for assignment
Restrictions on flipping the contract without seller consent
Many commercial real estate investors operate through different entities for tax, liability, or syndication purposes—this clause enables flexibility.
Define what’s included in the sale beyond the land and structure.
Appliances, HVAC equipment, and security systems
Furnishings in common areas or model units
Exterior structures (e.g., signage, sheds, fences)
Maintenance tools or office equipment
Clarify what stays, what goes, and what’s negotiable to avoid surprises at closing.
Protect both parties from publicizing or sharing deal details.
Restricts either party from disclosing deal terms to third parties, brokers, or media
Protects sensitive financial or proprietary data shared during due diligence
May include carve-outs for legal or financial advisors
This is especially critical when dealing with off-market properties, seller distress, or high-profile transactions.
Prevent the seller from shopping the deal once terms are being finalized.
Seller agrees not to entertain or solicit competing offers for a set time (e.g., 14–30 days)
Encourages the buyer to invest time and capital into due diligence without risk of losing the deal
If the seller insists on marketing during LOI negotiations, buyers may request a “first right of refusal” or walk away altogether.
Set a deadline to create urgency and ensure momentum.
Date and time by which the LOI must be accepted
Clause stating that after expiration, terms are void unless mutually extended
Clarify which parts of the LOI are legally enforceable.
LOIs are usually non-binding regarding purchase price and intent to buy
Clauses such as confidentiality, exclusivity, and assignment are often binding
A clearly marked “Binding Terms” section is standard practice
A binding letter of intent to purchase real estate is rare, but certain clauses can be legally enforceable. To avoid confusion, clearly say if the LOI is binding or non-binding. Also, mention that a purchase and sale agreement will come after both parties agree on the final terms.
A real estate LOI is commonly used in:
Commercial real estate transactions
Mergers and acquisitions (M&A) involving property assets
Multi-family and investment property deals
Lease agreements outlining key lease terms
A LOI in real estate sale allows parties to outline proposed transaction terms efficiently, ensuring clarity before committing to a formal purchase and sale agreement.
A well-written real estate sample letter of intent to purchase property should include a professional cover letter, introducing the buyer and summarizing their intent to purchase.
Keep it straightforward and concise to prevent misunderstandings.
Use industry-standard term sheets for a professional structure.
Specify whether the LOI is binding or non-binding.
A commercial real estate LOI can help investors negotiate in good faith while ensuring all critical details are covered.
Beyond real estate sales, LOIs are widely used in mergers and acquisitions. In M&A transactions, an LOI defines key proposed transaction details, such as:
If you need a real estate letter of intent sample, I’ve got you covered. Download my free LOI template to structure your deals the right way.
Using a LOI in a real estate sale provides multiple benefits:
Saves time by aligning expectations before drafting a full contract.
Minimizes legal expenses by reducing unnecessary contract revisions.
Protects buyers by securing a due diligence period before finalizing the deal.
A letter of intent in real estate serves as a valuable tool for buyers and sellers, ensuring transparent negotiations and structured agreements.
If you’re looking for a real estate letter of intent sample or guidance on drafting a binding letter of intent real estate, check out my book on Multifamily Real Estate Investing.
Download my free book: How to Create Lifetime Cashflow Through Multifamily Properties
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