REIClub - What are Letters of Intent and How Do You Write One? A Quick Video Explaining What To Include In A Letter of Intent... Hi, this is Frank Chen with REIClub, the only site you need as a real estate investor. Today I’ve got a quick video on Tips to building a detailed Letter of Intent Definition: Letters of Intent, in real estate, allow you to communicate the most important aspects of your offer. Investors use LOI’s to save time. Rather than completing an entire purchase agreement, you can just fill in some blanks and see if you get a bite. You can send out a ton of LOI’s much faster than purchase agreements. LOI’s seem more “official” to less sophisticated sellers, especially when agents are not involved. Most agents I’ve spoken with don’t really like them since it’s not official. They can be handwritten or typed, it really depends on the formality of the situation you are in. (Example: FSBO Homeowner vs. Commercial Deal). LOIs are usually “non-legally binding” so a seller can actually prospect other buyers while in talks with you. This is why speed of implementation is VERY important. COMPONENTS 1) Your Personal Contact Info or Business Information at the top - Include From and To - names, phone, email. 2) Brief “Dear John” explaining your intent to buy - 2-3 sentences. 1 Paragraph tops. 3) Desired Purchase Price by Investor 4) Inspection Period / Due Diligence - 3-30 days, depends on condition of home, buying as-is? 5) Financing Period - All cash offer? Pre-Qualified? 6) Desired Cash Deposit/Earnest Money at execution of LOI and of Purchase Agreement - $10-$1000, or percent at closing 7) Purchase Agreement Deadline - Let them know you will draft this up based on the agreed terms and provide them with an exact date of when they need to sign by - usually 24-48 Hours. 8) Additional terms - Have seller fix the roof, replace the broken window, etc… If you’re buying as is, not necessary. 9) Broker and Closing Costs - You don’t want to hide any fees from the seller that might surprise them later. Are you having the seller cover the closing costs, or are you paying for all of it? Smart investors usually get the seller to cover the closing costs, especially if it’s an all cash offer. 10) Investor and Seller Signatures at bottom with Dates (Print Option) Additional Tips: - Be very clear with who you are addressing in your LOI - Be very specific with your purchasing terms - Make sure your seller is comfortable as your are going through the terms - Remember, the information you include in the LOI, will more than likely be the same information you put into the purchase agreement. Any mistakes that need to be corrected may delay the process, costing you precious time. If the terms of your Letter of Intent (LOI) get accepted, do not waste anytime preparing the formal purchase agreement. In many cases you will use LOI for FSBO type properties to fend off other investors praying on your territory. Many homeowners will take an LOI very seriously, even though it is not legally binding, but that’s no reason to move slowly because all it takes is a sly Investor to come in after you “INFORM” the seller that it’s better for them to work with someone else that “Really Cares”. Again, this is Frank Chen with REIClub. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.
Posted on: Thu, 03 Jul 2014 19:44:27 +0000
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