A real estate letter of intent (LOI) outlines the preliminary terms of a property purchase or lease between a buyer and an owner. The goal of sending a letter of intent is to create a non-binding contract that contains the terms of the future purchase. The signing of the letter means the parties’ agreement to proceed with the transaction and create a binding contract. Alternatively, both parties might agree that the LOI is legally binding by including the respective wording in the document.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
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A letter of intent to lease sets the basic terms of a rental before the lease itself is written. Several steps come before the letter and a few follow it, starting with a check of the property. In this case, the tenant and real estate owner agree to become the renter and rentee and outline the terms of the lease agreement that will be legally binding for both parties. You can also start from our letter of intent template.
Step 1 – Checking the property
Before the parties negotiate, the tenant should check the condition of the home or commercial space. Look at the furniture, heating, plumbing and appliances, and raise any defects with the owner.
Step 2 – Discussion of the terms
Once the property suits the tenant, they can write and sign the letter of intent. Then they send it to the owner for review and signing. The owner will either agree to the general terms of the future contract or discuss the terms of the offer. The letter should touch on the important details of the agreement, such as:
Step 3 – Creating a binding contract
When the main terms of the LOI are agreed upon by the parties, they can move on and create a binding contract that will comprise more details of the agreement. The real estate transaction will be considered finalized once the parties sign the contract.
A purchase letter of intent shows the owner that you are serious about buying. It can cover both residential and commercial real estate and sets the terms to discuss before the purchase agreement. The process usually runs in five steps:
Step 1 – Assessing the condition of the property
The buyer should first check the condition of the property. The first check is usually done by the buyer to see whether the real estate matches their expectations.
The buyer might not be able to check every system without expert knowledge. This is why the parties commonly agree to invite a professional inspector. The inspector confirms that the property meets all of the standards. This step generally takes place after the parties sign the purchase agreement.
The seller might also have a pre-listing property inspection done before putting the property on sale. This lets them get ahead of any potential issues and make the buyer aware of existing defects. But the buyer has the right to have their own inspection done on the real estate they are about to buy.
Step 2 – Presenting a real estate letter of intent
As the next step, the buyer who is interested in the property should present an LOI to the property owner. It will solidify their interest in buying the real estate. It also starts negotiations of the terms of the real estate purchase agreement.
Step 3 – Making a purchase agreement
Real estate transactions call for negotiating a lot of details and a thorough inspection of the property. This is why a real estate purchase agreement is a substantial document that should be thoroughly crafted and reviewed by both parties.
A lawyer’s examination of the document is a must-do before signing the agreement if the parties don’t want t0 miss out on any important detail that should be agreed upon.
Step 4 – Conducting an inspection
A real estate purchase agreement will most likely contain the clause about having the property inspected by a professional. The cost of the inspection commonly falls on the buyer. This is especially true when the property owner has already done a pre-listing inspection.
Use the inspection period for your due diligence on the property. If the inspection finds defects, the buyer might want to renegotiate the terms of the contract in good faith. The buyer can ask the seller to fix the issues or lower the price.
If no major faults are found, or there wasn’t any inspection, the parties sign the purchase agreement. The title transfer process might then start.
Step 5 – Closure of the deal
A proper purchase agreement should include the date when the ownership of the property is transferred to the buyer. In order to complete the real estate transaction, the parties might need to visit a notary, escrow company, or involve a titling insurance agent. The fees for the transfer of the ownership should also be paid.
A letter of intent to lease and a letter of intent to purchase real estate are slightly different. Both outline the essential terms, such as the parties, purpose, date and price. Work through the steps below in order and keep the parts that fit your deal.
Step 1 – Date, subject, and the purpose
Start the LOI with the effective date, the intent of the sender and the purpose of the letter.
For a purchase, you could use wording like this: “This letter of intent indicates the basic terms for an agreement between the Buyer and the Seller. After the letter of intent is constructed, a formal real estate purchase contract might be designed to the benefit of the parties involved.”
Step 2 – The parties
Next, name the parties behind the letter. If the property is on sale, the parties will be called the Buyer and the Seller, and their names should be included. If the property is to be leased, the parties are called the Lessor and Lessee.
Step 3 – Property address and type
Add the address of the property and its type, commercial or residential.
Step 4 – Type of the transaction
State whether the LOI outlines the basic terms of a lease or of a property purchase agreement.
Step 5 – Financial terms, payment method
One of the basic conditions discussed in the LOI is the price and payment method.
In a letter of intent to purchase real estate, this paragraph should tell that the Buyer offers to purchase the property at a certain price. The Buyer should also include the payment method they intend to use. If they intend to use bank financing, they should say so. They should also state whether the payment depends on financing.
If a letter of intent is created to lease the property, include the base rent, security deposit and expenses.
Step 6 – Conditions of the purchase (lease)
For an LOI that includes the basic terms of the property purchase, outline the following conditions of the transaction:
For a letter that includes the basic terms of the lease, add the following details:
Step 7 – Binding effect
This section of the letter should tell whether the LOI is considered binding or not. If the parties agree to make it non-binding, they should state that the terms in the letter are only there to help the parties reach an agreement in the future.
Step 8 – Governing laws
Usually, by governing law the parties consider the state where the real estate is located.
Step 9 – Acceptance
The LOI should include a statement about what counts as acceptance of the offer. Usually, it is the signature of the recipient. Add the date by which the recipient should sign.
If you need a good letter of intent to negotiate terms with the other party, use the template provided on our website. It shows what to include when you move forward with leasing or purchasing residential or commercial property.
You can also create a customized document in a few minutes by answering a set of questions with our online document builder.
This sample shows a letter of intent to purchase a home. The buyer, Holly Smith, offers to buy a house from the seller, Sam Claus. The letter covers the price, the deposit, the inspection period, closing and acceptance.
From: Holly Smith
734 Mayfair Dr.
Pearland, TX 77581
April 4, 2021
To: Sam Claus
160 Pulaski Lane
Amarillo, TX 79107
Re: Intent to Purchase Residential Property
4 Inverness Street, Austin, TX 78753
Dear Mr. Claus,
I am pleased to present this letter of intent to purchase the real property and any improvements thereon located at 4 Inverness Street, Austin, TX 78753, according to the terms and conditions described below.
1. Purchase Price. The purchase price shall be $300,000 (three hundred thousand dollars), payable in cash. A deposit amounting to $10,000 (ten thousand dollars) shall be paid upon the execution of a Purchase Agreement between the Seller and the Buyer, and payment of the remaining sum shall take place in bank-certified or wired funds at closing.
2. Contract. Within ten (10) business days after the acceptance of this Letter of Intent by the Seller, the Buyer shall proceed to draw the Purchase agreement containing the terms and conditions outlined in this Letter of Intent.
3. Conditions. The Purchase Agreement to be drafted between the Seller and the Buyer shall contain the following conditions:
4. Closing. Closing of the transaction should occur within 30 (thirty) days after the expiration of the Inspection Period.
5. Binding Effect. This Letter of Intent states the major terms of the agreement that the Buyer would be prepared to move forward with. This Letter of Intent is in no way a legally binding agreement between the Buyer and the Seller.
6. Acceptance. If you agree to the above-mentioned terms, please sign this Letter of Intent and return the duplicate copy within 5 (five) business days after the delivery.
Buyer: Holly Smith Dated: 04/04/2021
Seller: Sam Claus Dated:
A real estate letter of intent (LOI) is a short letter that outlines the main terms of a property purchase or lease before the formal contract is written. Reading the terms together helps both sides spot risks early. An LOI names the parties, describes the property and lists terms such as the price, the payment method and how to accept the offer.
Most letters cover the following key elements:
A purchase letter focuses on the price, payment method, closing date and inspection period. A lease letter focuses on the base rent, security deposit and expenses, plus details such as renewal, rent increases, subletting, pets and parking.
The buyer or tenant usually writes the letter and sends it to the property owner for review and signing. The landlord or seller can agree to the general terms or discuss them before the parties move on to the contract.
General information, not legal or tax advice.
