What to Know About Letters of Intent in Real Estate and Business Deals

Thinking about selling your business or a piece of real estate? You’ll likely need to start with a Letter of Intent (LOI), so it is important to know the basics before you dive in.

What is a Letter of Intent (LOI)?

A Letter of Intent is typically the first formal step in a sale process. It is a document that outlines the key business, legal, and tax terms before a binding agreement is drawn up. Think of the LOI as the transaction’s roadmap. It gets both sides on the same page early in the process.

When do you need an LOI?

An LOI is a good idea any time there is a complex transaction like selling a business, or commercial property. Having an LOI is especially useful when there are multiple moving parts such as financing, contingencies, or regulatory approvals. Even if you think your deal is straightforward, an LOI can set expectations early and help avoid wasted time.

What’s usually included in a real estate LOI?

While every deal is different, most LOIs for real estate include:

• The proposed purchase price
• Deposit amount
• Financing terms, if any
• Due diligence requirements and timeline
• Breakdown of closing costs
• Closing contingencies
• Proposed closing date
• Exclusivity provisions
• Confidentiality provisions

Is an LOI binding?

It depends. Most of the time, the overall LOI is non-binding—meaning either party can walk away before signing a final agreement. But certain provisions within the LOI, like confidentiality, exclusivity, or how long the LOI remains in effect, are often binding and legally enforceable.

Do I need a lawyer for an LOI?

Yes—ideally before you sign. It can be tempting to treat an LOI as a quick formality, but it can have major consequences down the line. A qualified lawyer will:

• Flag which terms are binding and help you negotiate them to protect your interests,
• Add clarity and precision to vague language,
• Ensure the deal terms reflect market norms,
• Identify tax or legal issues early on, and
• Align the LOI with your business goals and risk tolerance.

Bottom line:

An LOI might feel like just the first step, but it’s a crucial one. Whether you’re buying or selling, starting with a strong, lawyer-reviewed LOI sets the tone for the entire transaction. It reduces the chance of misunderstandings, delays, or deal fatigue and improves your chances of reaching the closing table.

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