Letter of Intent vs. Offer

A residential real estate offer is a binding proposal that includes a purchase amount submitted by the buyer to the seller with other specific terms, conditions, and contingencies.

A letter of intent is a non-binding document in which terms (price, closing date, etc.) are proposed but either party can back out before a formal contract is introduced.

What’s Included

Introduction

A letter of intent begins with a brief introduction that states the buyer’s intention to enter an agreement to purchase the seller’s property.

Buyer and Seller

Both parties must be clearly identified along with their addresses.

Transaction

The fundamental details of the transaction are the property address and the buyer’s offer (purchase price). The original offer may be negotiated and amended multiple times before a binding purchase contract is signed.

Financing

Buyers often need to obtain financing to afford a home; therefore, the letter should establish whether or not financing is a condition of the transaction.

Closing

Closing is the date on which property ownership will be transferred to the buyer. The letter can specify the closing date and which party is responsible for closing costs.

Inspection

The buyer will usually demand an inspection of the premises before they consider signing a purchase agreement, which should be relayed in the LOI.

Standstill

Real estate LOIs will often prohibit the seller from negotiating to sell the property to any other party until a specific date. This provision temporarily gives the buyer the exclusive right to purchase, provided they sign the letter.

Signatures

The buyer and seller will need to sign the document to affirm their intention to proceed in good faith and not pursue other buyers. Depending on the structure and terms of the letter, its contents may or may not be legally binding once it’s signed.

Sample

Download: PDF, Word (.docx), OpenDocument

RESIDENTIAL LETTER OF INTENT TO PURCHASE

Date: [DATE]

[SENDER (i.e., BUYER) NAME]
[SENDER STREET ADDRESS]
[SENDER CITY, STATE, ZIP]

[RECIPIENT (i.e., SELLER) NAME]
[RECIPIENT STREET ADDRESS]
[RECIPIENT CITY, STATE, ZIP]

RE: Intent to Purchase Property

This Letter of Intent (the “Letter”) sets forth the proposed terms and conditions of the transaction described hereunder and shall govern the relationship between the Buyer and Seller (the “Parties”) until replaced by a definitive, formal agreement addressing the same transaction and subject matter (the “Definitive Agreement”). The transaction considered in this Letter and in the Definitive Agreement is subject in all respects to the following:

Please note: Any sections that do not apply may be struck through or deleted.

1. THE BUYER. [BUYER NAME] (the “Buyer”) with a mailing address of [BUYER MAILING ADDRESS].

2. THE SELLER. [SELLER NAME] (the “Seller”) with a mailing address of [SELLER MAILING ADDRESS].

3. TRANSACTION This Letter is for the purchase of the Property located at [PROPERTY ADDRESS] (the “Property”) for $[AMOUNT] (the “Purchase Price”).

4. FINANCING. This Letter is: ☐ – Conditional Upon Financing ☐ – Not Conditional Upon Financing.

5. CLOSING. The Closing shall occur on [DATE] (the “Closing”). Any change of date for the Closing must be agreed upon in writing by both Parties.

6. CLOSING COSTS. All costs associated with the Closing shall be the responsibility of (check one) ☐ the Buyer ☐ the Seller ☐ the Parties each bearing their own expenses.

7. POSSESSION. Possession of the Property shall be given on [DATE] (the “Possession”). Any change of date for the Possession must be agreed upon in writing by the Buyer and Seller.

8. STANDSTILL AGREEMENT. Following the execution of this Letter, and until Closing, the Seller shall not negotiate for the sale of the Property with any other party unless either the Parties agree in writing to terminate this Letter, or the Parties fail to sign a Purchase Agreement by [DATE].

9. INTENTION OF THE PARTIES. This Letter sets forth the intentions of the Parties to use reasonable efforts to negotiate, in good faith, a Definitive Agreement with respect to all matters herein. Notwithstanding paragraphs 4 and 8 through 11, which shall be legally binding, any legal obligations with respect to all other matters shall only arise if and when the Parties execute and deliver a Definitive Agreement.

10. GOVERNING LAW. This Letter shall be governed under the laws of the State of [STATE NAME].

11. SIGNATURES.

Seller Signature: ____________________________
Date: [MM/DD/YYYY] Print Name: [SELLER PRINTED NAME]

Buyer Signature: ____________________________
Date: [MM/DD/YYYY] Print Name: [BUYER PRINTED NAME]

Residential Letter of Intent to Purchase