What is a LOI ?
LOI is the acronym for Letter Of Intent. As its name suggests, it is a letter of interest issued by a potential buyer.
It formalizes their interest in studying the acquisition of a property by obtaining more information.
This is a typical process in real estate before entering into a deeper agreement and commitment.
How is a LOI composed?
This document describes the property details, identity the potential buyer (name, address, company…) and his interest in acquiring such a property.
It is also mentioned that he will keep the confidentiality of all documents shared related to the asset. He agrees to communicate all correspondence and option to purchase through the person/entity who presented to him the property.
Depending on the property complexity, the length of a LOI can vary from one to several pages.
Why a LOI is requested ?
A LOI is needed in real estate mainly for off market property. Through this document the future buyer reveal his identity by certifying his interest and his financial capacity to acquire it.
From a seller point of view, it is also a guaranty; off-market properties are generally expensive (worth several millions) that is why it may arouses curiosity of non-relevant customer.
Thanks to a LOI the seller will therefore be able to analyse if the potential buyer is reliable and able to acquire the property. Then he will decide to share additional information about the asset and if it is conclusive to schedule a viewing.
The letter of intent is in most of the cases accompanied by a proof of funds.
As real estate professionals, LUNAMER do provide a first analysis of every potential buyers before introduction to the seller. It is our duty to make sure of the reliability of the client we work with.
Is a LOI a commitment to buy?
The letter of intent do not commit the person who sign it and cannot be legally enforced. The purpose is only to express an interest and the request of confidential information.
By 👩🏻💻 Hélène and 👩🏼💻 Marie
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