The LOI (letter of intent)

An LOI can fit on five pages and still conceal a six-figure disagreement. Short is not simple. It is compressed, and compression is where missing words become expensive.

A letter of intent records the proposed business terms of a transaction before the purchase and sale agreement, or PSA, does the heavier legal work. Price matters. So do the deposit, diligence trigger, access rights, financing, closing conditions, confidentiality, exclusivity, and the exact provisions the parties intend to bind them.

The point is not to make the deal look agreed. The point is to discover where it is not agreed while the disagreement can still be handled in a redline instead of a demand letter.

This is legal and transaction education, not legal advice. Enforceability depends on the language, conduct, governing law, and facts. Qualified local counsel should review the actual letter before anyone signs it.

Mark the map before drawing the contract

An LOI should settle the major business terms and identify what remains open. It should not impersonate a 60-page PSA in six-point type.

State which provisions are intended to be binding and which are not. Confidentiality, exclusivity, access, expenses, governing law, and broker provisions are often treated differently from proposed purchase terms. But a “nonbinding” heading is not a judicial decision. For example, California Civil Code section 1624 requires certain agreements involving the sale of real property or an interest in it to be in writing and signed by the party to be charged. Other states have their own statutes and case law. Counsel must evaluate what the document and the parties’ conduct actually do.

Name the buyer, seller, property, included personal property, and transaction structure precisely. If assignment is allowed, say to whom and whether the original buyer remains responsible for binding obligations. “Buyer affiliate” can be defined. “An LLC to be named when somebody gets around to it” is not a definition.

The file name does not decide enforceability. The words and conduct get that assignment.

Give every deadline a starting gun

Weak LOIs say the buyer has 30 days for diligence. Better LOIs answer four less attractive questions:

1. When does the period begin?
2. Which seller deliveries must arrive first?
3. What happens if a required delivery is late or materially incomplete?
4. When does the deposit become nonrefundable, and what exceptions survive?

Tie the diligence period to receipt of a defined package when that is the negotiated structure, not automatically to the date ink reaches the signature line. Name the required records: current and historical rent rolls; executed leases and amendments; tenant ledgers; delinquency and security-deposit reports; trailing monthly operating statements; transaction-level general ledger; bank statements; tax bills; insurance policies and loss runs; utility bills; service contracts; payroll records; permits; notices of violation; prior property-condition and environmental reports; title materials; survey; assumed-debt documents; and pending claims.

That list is not decorative diligence. Fannie Mae’s current Multifamily Selling and Servicing Guide, effective July 6, 2026, uses current rent rolls in underwriting and separately accounts for concessions and bad debt. Freddie Mac’s current Chapter 40, updated June 23, 2026, requires current rent rolls and property income-and-expense statements in post-purchase reporting. Records serious lenders use after closing deserve a named delivery line before your deposit changes character.

A deadline without its required delivery is a trap with a date stamp.

The 25-day promise with 14 usable days

Consider this hypothetical acquisition:

• Purchase price: $6,400,000.
• Initial deposit: $75,000, refundable through diligence.
• Diligence: 25 calendar days from LOI execution.
• Seller delivers the full package on day 11.
• Deposit becomes nonrefundable at 5:00 p.m. on day 25.

The buyer did not receive 25 working days with the records. The buyer received 14 calendar days to reconcile leases and cash, inspect units, review title and survey, obtain insurance and debt feedback, price physical findings, and negotiate the PSA. One weekend and one late vendor can take a meaningful bite out of that period.

If the parties agree, rewrite the trigger so diligence ends 25 days after receipt of the complete listed package. For items due later, specify any day-for-day extension. Define who confirms completeness and preserve negotiated termination rights for material defects, title failures, casualty, condemnation, and financing conditions.

The subtraction is elementary. The $75,000 consequence is not.

Put the business terms in sentences

State the purchase price and what it assumes. Identify each earnest-money deposit, its holder, due date, refundability, and release mechanics. Put dates on the target PSA, diligence expiration, financing milestones, and closing window.

Address physical access, unit sampling, interviews, invasive testing, restoration, insurance, and seller notice. Cover title and survey review, required cures, contracts, prorations, security-deposit transfer, casualty, condemnation, closing deliveries, and possession. Allocate brokerage fees and each side’s expenses. For seller financing or a loan assumption, list the principal proposed terms and required approvals without writing as though lender consent has already arrived.

Exclusivity needs a start, an end, prohibited conduct, and a counsel-reviewed remedy. “Seller will cooperate” needs names and verbs. State who may contact lenders, managers, vendors, residents, and government agencies, through which channel, and with whose consent.

Ambiguity feels flexible only while both parties want the same thing. The LOI should be written for the first day they do not.

Loud price, removable economics

A buyer can headline an $8 million price while the terms include a $300,000 credit, a broad financing condition, and three extension rights. A seller can repeat “accepted at $8 million” while ignoring how many pieces of that number can still detach.

Do not compare proposals by headline price. Build a one-page terms matrix with price, credits, deposit at risk, diligence period, extensions, financing, seller work, closing conditions, and outside date. Compare the full economics and execution conditions.

The largest number in the LOI is often the one receiving the best lighting. Read the clauses standing behind it.

Questions for the hostile reading

• What exact fact lets either party terminate, and until what time?
• Which provisions survive termination?
• May the seller continue marketing, solicit backup offers, or share diligence?
• What happens if the lender needs ten more days or rejects an assumption?
• What if unit access reveals conditions omitted from seller reports?
• Who must cure title defects, and which defects may the buyer accept or reject?
• Is any principal, broker, property, or included asset named incorrectly?
• Must the PSA be signed by a deadline, and what happens if negotiations continue past it?
• Which sentence would the other side quote first if the relationship became hostile tomorrow?

That final question is not pessimism. It is proofreading with consequences.

Draw the dependency sheet

Before sending the draft, draw one line from LOI signature to closing. Put every deadline on it. Beneath each deadline, list the information, approval, and delivery required to make the decision. Then place every deposit change directly below its trigger.

Circle any deadline that can arrive before the required information. Have counsel fix the language and the parties fix the business point before the LOI leaves the inbox.

A serious maybe should purchase clarity. If the page only postpones the disagreement, it did not negotiate the deal. It scheduled the argument.