Letter of Intent to Purchase Commercial Real Estate

A letter of intent (LOI) to purchase commercial real estate is a letter that is sent by a real estate investor to a property owner to purchase a commercial space.

In comparison to a full legal contract, a letter of intent to purchase contains only basic terms of the possible purchase agreement and does not contain a plethora of legal terms. With this free fillable letter of intent to purchase real estate, a buyer and seller can get a concise picture of what their future agreement might look like and discuss the terms that they do not agree with before executing a formal binding agreement. To learn more about letters of intent, check our full article: https://formspal.com/letter-of-intent-template/.

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How to Prepare a Letter of Intent to Purchase Commercial Real Estate?

Most commonly, this offer is non-binding, meaning that parties agree to create a comprehensive contract in the future. Along with summarizing the terms of the purchase agreement, the LOI helps parties initiate the negotiation process and conduct due diligence before they enter into a legally binding agreement.

A letter of intent is typically prepared by a prospective buyer who seriously considers buying commercial space. The information to include in the letter is generally provided by the seller or selling broker. Some details might be also obtained when conducting a preliminary due diligence of commercial real estate.

How to Fill Out a Letter of Intent to Purchase a Commercial Property

The length of the LOI is usually from one to three pages, but it will depend on the complexity of the property that is offered for purchase. In any case, a clear LOI should be written in the following steps.

Step 1 – Purpose of the letter and address of the property

The letter of intent should start with stating its purpose – in our case, serving as a non-binding letter of intent to purchase property located at [insert the address of the property].

Step 2 – Information about the seller and prospective buyer

Next, the letter should specify who the prospective buyer and seller are. The address and contact information of the parties should be included as well.

Step 3 – Purchase price

The next information to include in the LOI is a purchase price the prospective buyer offers – it should be mentioned both in text and numbers.

Step 4 – Terms for financing

The letter might state that the buyer will secure the financing offered to the seller from a third party. In this section, parties might also mention who will pay for fees associated with the purchase (closing fee, transfer tax, etc.).

Step 5 – Due diligence

The next important step is to include the period that the prospective buyer needs to conduct due diligence, that is, check of all the documents pertinent to the deal. The period should consist of the time needed for the inspection period and additional time to close the deal.

Step 6 – Closing date

Further, the letter should specify when the closing of the deal will take place.

Step 7 – Escrow

This section should include the title of the escrow agent (with their address and contact details) and the amount of the escrow deposit.

Step 8 – Additional clauses and terms

Next, the letter should tell whether it is subject to any extra clauses or terms, for instance broker commission or other agreements.

Step 9 – Documents needed to close checklist

Here, all the documents that the buyer will or might need from the seller should be listed. It includes insurance policies, tax returns for past several years, map of the commercial space, copies of existing leases, profit and loss statements for past several years, receivable accounts, past utility receipts, and any other documents the buyer might deem necessary to make sure the commercial space that they are about to buy corresponds to certain standards.

Step 10 – Inspection period

The letter should also specify the time that the buyer needs to conduct certain inspections of the property (for example the foundation, air conditioner and heating systems, etc.).

The section should also include the statement that in case the buyer finds any unacceptable conditions of the seller’s documents or property, the purchase agreement can be canceled and the buyer should get back their earnest deposit.

Step 11 – Acceptance

The letter of intent should tell till what date the offer is considered open.

Step 12 – Binding effect

Lastly, if the offer is not legally binding, it should be stated in the letter.

Step 13 – Binding effect

Signatures of both the seller and buyer should finish the letter, making it valid.

Sample Letter of Intent to Purchase Commercial Real Estate

From: Lory Markle
7097 W. Princess Street
Angleton, TX 77515
April 4, 2021

To: Theon Black
74 Thompson St.
San Antonio, TX 78211

RE: Letter of intent to purchase commercial property at the address 49 West James Ave. Houston, TX 77081.

Dear Mr. Black,

Pursuant to this letter of intent, Lory Markle (Purchaser) intends to purchase from Theon Black (Seller), a corporation organized and existing under the laws of state Texas, with its principal office located at 49 West James Ave. Houston, TX 77081, herein referred to as Property, on the following terms and conditions:

1. The Buyer. Lory Markle
2. The Seller. Theon Black
3. Description of property. All real and all personal property located at 49 West James Ave. Houston, TX 77081, including all leases, agreements, and intangibles related to the Property.
4. Purchase price. The Purchase Price shall be $100,000 (one hundred thousand dollars), payable in cash.
5. Bank financing. The Buyer has made it known that their ability to buy Property is conditional on financing. The Buyer agrees that if they are unable to obtain a commercial real estate loan, this letter of intent and the clauses of the future Purchase agreement are no longer valid.
6. Closing. The Closing should occur on April 14, 2021, or earlier by mutual agreement between the Buyer and Seller.
7. Closing costs. All costs associated with Closing should be the responsibility of both the Buyer and the Seller, bearing their own expenses.
8. Possession. Possession of the Property should be given on April 14, 2021, or earlier by mutual agreement between the Buyer and the Seller.
9. Property inspection. Once the Buyer and the Seller execute a binding formal agreement, the Buyer has seven (7) business days to inspect the Property.
10. Binding effect. This letter of intent is created solely for the purpose of negotiating the terms of an additional binding agreement.
11. Acceptance. If you agree to the terms mentioned above, please sign this Letter of Intent and return the duplicate copy within five (5) business days after the delivery.

Buyer: Lory Markle                                                                   Date:
Seller: Theon Black                                                                  Date:

Published: Jul 20, 2022