What is a Letter of Intent?
1.5 min read.
A Letter of Intent (LOI) is a significant document used in commercial real estate to outline the key points of a proposed purchase or lease agreement. Despite being non-binding, it demonstrates the buyer or tenant's commitment to the deal and intention to proceed in good faith. Before presenting an LOI to the owner, the buyer or tenant should conduct thorough research and property tours to ensure informed decision-making.
As the commercial real estate broker, you represent the buyer or tenant to draft the LOI after the property tour and informal discussions with the owner. The LOI highlights crucial deal points such as the price, due diligence period, financing, and closing of possession date. Although the terms of the initial LOI can be changed or buyer may withdraw from the deal based on new information during due diligence, providing an LOI demonstrates seriousness and initiates the negotiation process.
The LOI serves as a foundation for negotiations in commercial real estate transactions. While it is not legally binding, it symbolizes the buyer or tenant's dedication to the deal and their intent to proceed genuinely Understanding the significance of an LOI and conducting thorough research beforehand can streamline the negotiation process and ensure a transparent and informed decision-making process in the dynamic world of commercial real estate.
Reference
Everything to know about Loi in commercial real estate. Peoples Capital Group. (2023, April 14). https://www.peoplescapitalgroup.com/what-is-loi-in-real-estate/
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