What is a letter of intent to purchase?
This type of letter of intent (LOI) can be used as a starting point for negotiating the basic terms of a purchase to ensure a fair deal for both parties. Details in the letter can include information about both parties, the purchase timeline, purchase price, payment method, and more. While a letter of intent to purchase is not legally binding, it can lay the groundwork for an official purchase agreement.
When and why should you use one?
A letter of intent to purchase can be helpful for any type of complicated transaction that requires careful negotiation. It is similar to a memorandum of understanding in that it is not a definitive agreement but instead is a stepping stone toward one.
Benefits of LOIs for sellers.
As a seller, this type of letter can be an important step in your due diligence process; if a dispute arises down the line, it helps prove you were negotiating in good faith.
Benefits of LOIs for buyers.
While it won’t necessarily give the buyer exclusivity or guarantee the purchase for them, signing a letter of intent confirms their interest in the purchase and serves as a record of where they stand on the terms.