| A letter of intent is a common way to express your | | | | negotiations. There is no filtering through legally written |
| intentions to purchase a property without having to | | | | clauses and other such unnecessary information at this |
| write a formal, legal binding contract. The letter of intent | | | | stage in the project. When the letter of intent spells out |
| is presented to a seller in the very preliminary stages | | | | each detail clearly, the seller can come back with |
| of a project. The intentions of a buyer are spelled out | | | | alternate terms of which he or she would be more |
| clearly and simply so the seller knows exactly how the | | | | accepting. This negotiation can go back and forth |
| buyer wants to purchase the property, and under | | | | without the rewriting of lengthy pages that either party |
| what terms. | | | | may misconstrue. |
| In my experience, a casual, personal letter to the seller | | | | If the letter of intent is accepted, then the due diligence |
| is often the best received way to present your | | | | period will begin. It will continue until the time agreed |
| intentions to purchase a property. Some people insist | | | | upon by both parties in which, at the end of the term, a |
| on drafting a formal, multi-page, non-binding contract | | | | binding contract is constructed. Terms may change |
| filled with legal jargon that can often intimidate the | | | | during this time if certain aspects of a property, |
| seller. A seller wants to easily see how the buyer | | | | previously not disclosed, are discovered. For example, |
| wants to purchase the property, and determine if he or | | | | there may be soil contamination in which the buyer will |
| she can accept the presented terms. | | | | not want to purchase the property and will safely |
| Read on to learn how to construct a letter of intent | | | | option out of the non-binding contract. Or, perhaps the |
| and what to include. | | | | property is in a lot worse condition than originally |
| Let's investigate the contents of a letter of intent so | | | | thought, causing the buyer to negotiate a decreased |
| you, too, can construct one before putting a property | | | | purchase price. |
| under contract. | | | | The letter of intent allows for all facts and figures to |
| A letter of intent (LOI) must have five basic elements | | | | be verified so that the buyer understands exactly |
| in its content: | | | | what he or she is getting in the property. If the buyer |
| 1. The buyer's name | | | | finds something that he or she can not accept, or |
| 2. The property address and description | | | | something not originally expected, he or she can back |
| 3. Your offer which includes:a. Purchase | | | | out without any recourse or punishment. |
| priceb. Down paymentc. Termsd. | | | | Always use a letter of intent to present your |
| Conditionse. Due diligence timef. Closing | | | | preliminary offer to a seller. This will save you writing |
| timeg. Any other clauses or provisionsh. | | | | time, legal fees, and will be easily read and understood |
| When a formal contract will be written up if the LOI | | | | by the seller and any other interested parties who |
| is approved | | | | must be made aware of your intention to purchase |
| 4. A clause that makes the LOI non-binding | | | | the subject property. |
| 5. Your signature and a place for the seller's | | | | Always construct the letter of intent with honest and |
| signature | | | | detailed facts. Nothing must be overlooked as it can |
| That is about it for the content, believe it or not; it is | | | | cause problems in the future. Be prepared to negotiate |
| direct and straightforward without any fluff or | | | | terms, and always know what you are willing to |
| nonsense. You are simply covering each detail so the | | | | accept if you should get a counter offer. |
| seller knows exactly what the buyer intends to do. | | | | Use this tool as an easy and direct way to purchase a |
| Having an informal letter of intent also allows for easy | | | | property every time. |