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A commercial real estate purchase offer requires a two step process that includes a Letter of Intent followed by a Purchase and Sale Agreement. The importance of this two step process should not be underestimated because the non-binding Letter of Intent is quick, efficient and lays the foundation, for the lengthy legally binding Purchase and Sale Agreement.
The Letter of Intent begins your offer and is a concise, straightforward document that should be easy to understand and contains specific information spelling out the basic terms of the agreement you want the seller to read without feeling the urge to involve legal counsel. Your terms and conditions outlined in the Letter of Intent will begin structuring the Purchase and Sale Agreement for the commercial real estate under consideration.
The Letter of Intent is a combination of a cover letter with specific elements referencing documents you request for information. One particular part of the letter of intent you want to establish is your validity as an investor with an offer worth considering and your intention to purchase the property described. Only a fully executed purchase and sale agreement legally binds the parties to the deal.
The structure of a successful Letter of Intent will include but not be limited to the following:
Property description: a brief, accurate description of the property naming the number of units, bedrooms and baths, including the name of the apartment complex as described in the listing or information you received.
Purchase price: determined through an evaluation process that considers required rate of return, comparable market price and net operating income in relation to the price.
Earnest money deposits: amount applicable to the purchase price required and time frame needed to deposit it.
Date: establishes the response time by the seller of accepting or rejecting your offer.
Title and Title Insurance: relates to presenting documentation of clear title to the property
Due diligence: an attached exhibit outlining specific items for review required from the seller
Conditions of the offer: these include various items related to closing, costs, extensions, financing, property review, defaults, etc.
A well presented Letter of Intent sets the parameters for the negotiation and can position you for a successful Purchase and Sale Agreement.
Learn more about the Purchase Offer Process from a proven Investor Education Resource:
Investor Tours University is a dedicated resource helping investors build wealth and achieve their defined level of success. We offer state-of-the-art commercial real estate investing education, tailored to meet the needs of investors with varied backgrounds and experience levels. Our faculty network consists of national experts in legal, tax, investment strategy, property management, acquisition and sales professionals who practice daily what they teach investors, which is how to achieve generational wealth using commercial real estate.
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Source by Monte Lee-Wen