Real Estate Letter of Intent: What Investors and Wholesalers Should Put in an LOI

A real estate letter of intent is a short document that lays out the main terms of a proposed purchase (price, deposit, due diligence, closing date) before anyone signs a full purchase and sale agreement. A well-drafted real estate letter of intent is mostly non-binding: it tells the seller you are serious and frames the deal, while a few specific clauses like confidentiality or exclusivity can be made enforceable on purpose.

Investors use LOIs on commercial, multifamily and land deals, and wholesalers use them to get an off-market owner talking numbers. The catch: courts look at what the document says and how the parties acted, not at its title.

LOI vs purchase agreement vs offer

Think of the LOI as the term sheet before the contract. It settles the business terms so nobody drafts 20 pages around a price the seller would never accept. The purchase and sale agreement (PSA) is the binding contract, and it is the document you assign in a wholesale deal.

Document	Binding?	Typical length	What it does
Letter of intent	Mostly no, by design; selected clauses yes	2 to 4 pages	Proposes key terms, opens negotiation, often required by commercial brokers before a PSA
Offer (residential)	Becomes a contract once accepted and signed	Often a state or association form	Is the contract itself once the seller signs
Purchase and sale agreement	Yes	10 to 40 pages on commercial deals	Sets deposit, contingencies, reps and warranties, default remedies, closing mechanics

On a single-family house the accepted offer is the contract, so wholesalers skip the LOI and use a wholesale purchase agreement. The LOI earns its place when the deal is big or complex enough to settle economics before drafting.

When investors and wholesalers send an LOI

• Broker-listed commercial and multifamily. Most commercial listing brokers expect an LOI first. They collect several, compare them side by side, and invite one or two buyers to a PSA. Sending a full contract instead can read as amateur.
• Off-market small multifamily. An owner of a 6 to 20 unit building often reacts better to a two-page letter than a thick contract.
• Land. Feasibility work (zoning, utilities, surveys, perc tests) takes time, so agree on a long due diligence window before paying for studies.
• Multiple decision makers or new structures. Estates and LLC owners can circulate a short letter internally, and you can float seller financing or a longer close without committing to it.

What goes in a real estate letter of intent, clause by clause

Most LOIs share the same skeleton:

Clause	Usually binding?	What to write / watch
Parties and property	No	Buyer name plus “and/or assigns”; legal description or parcel number
Purchase price	No	Fixed number, and how it is paid (cash, new loan, seller carry)
Earnest money	No	Amount, escrow holder, when it goes hard
Due diligence period	No	Length in days from PSA signing, documents seller must deliver
Financing	No	All cash, or a financing contingency with a deadline
Closing timeline	No	Days after due diligence ends; any extension option
Assignment	No (carried into PSA)	Express right to assign without seller consent
Exclusivity / no-shop	Often yes	Seller stops marketing for a set number of days
Confidentiality	Often yes	Neither side discloses terms or seller financials
Expiration	Yes in practice	Offer lapses if not countersigned by a date
Non-binding statement	Yes	Clear, conspicuous, near signatures

Price, earnest money and financing

State the price as one number; a range invites the seller to anchor on the top. Put the deposit in dollars, name the title company, and say when it goes non-refundable (usually at the end of due diligence). Wholesalers should keep it modest and refundable; see earnest money in wholesaling. Brokers rank all-cash, no-contingency LOIs higher, so do not promise that unless it is true.

Due diligence and closing

On income property, list the documents you want: rent roll, trailing 12-month operating statement, leases, utility bills and the tax bill. Start the clock when those arrive, not when the PSA is signed, or a slow seller eats your window (our due diligence checklist has the full list). Set closing a fixed number of days after due diligence ends, with one extension option if your buyer may need financing.

Assignment rights (“and/or assigns”)

Name the buyer as “Your Company LLC and/or assigns” and state that the buyer may assign the PSA without seller consent. Raising it in the LOI means the seller agrees while discussing price instead of finding it on page 14 of the contract. Be upfront; a seller who later learns about an assignment fee they never understood looks for a way out. Some states now regulate how wholesalers market contracts, so check the rules in yours (see is wholesaling legal).

Exclusivity, confidentiality, expiration and the non-binding statement

These are the clauses you usually want enforced. A no-shop takes the property off the market for, say, 21 days while you negotiate the PSA. Confidentiality keeps financials and price private. An expiration date stops a seller from shopping your letter for weeks. The non-binding statement then says everything else is not a contract. A 2003 Texas A&M Real Estate Center article on commercial letters of intent recommends putting that statement in bold or capital letters just above the signature lines and keeping binding terms in their own section. It also warns that vague phrases like “subject to attorney approval” can backfire.

Sample LOI language (hypothetical)

HYPOTHETICAL excerpt for an 8-unit building. All names and figures are made up for illustration; adapt the wording to your state and deal.

1. Buyer: Oakline Holdings LLC and/or assigns.
2. Purchase price: $690,000, payable in cash at closing.
3. Earnest money: $10,000 with a mutually agreed title company within 3 business days after PSA signing, refundable during due diligence.
4. Due diligence: 30 days from Seller’s delivery of the rent roll, leases, T-12, and utility and tax bills. Buyer may terminate for any reason.
5. Financing: None. Buyer’s obligation is not contingent on a loan.
6. Closing: Within 30 days after due diligence ends.
7. Assignment: Buyer may assign the PSA to an affiliate or third party without Seller’s consent.
8. Exclusivity (binding): For 21 days after Seller signs this letter, Seller will not solicit, negotiate or accept other offers for the property.
9. Confidentiality (binding): Both parties will keep these terms and property information confidential, except with lenders, advisors and potential assignees.
10. Expiration: This letter is void if not signed by Seller by 5:00 p.m. on [date].
11. NON-BINDING: EXCEPT FOR PARAGRAPHS 8 AND 9, THIS LETTER IS NOT A CONTRACT AND CREATES NO OBLIGATION TO BUY, SELL OR NEGOTIATE. NEITHER PARTY IS BOUND UNTIL A WRITTEN PURCHASE AND SALE AGREEMENT IS SIGNED AND DELIVERED BY BOTH.

Paragraph 10 also disclaims any duty to negotiate, for reasons the next section explains. For pricing the offer itself, see how to write a wholesale offer.

When a “non-binding” letter binds: the cases

Texaco v. Pennzoil (Texas, 1987)

In January 1984 Pennzoil and major Getty Oil shareholders signed a memorandum of agreement at $110 per share plus a $5 stub, and a press release announced an “agreement in principle” that was “subject to execution of a definitive merger agreement.” Texaco then bought Getty. Pennzoil sued Texaco for interfering with its contract, and a Houston jury awarded $7.53 billion in actual damages plus $3 billion in punitive damages. The Texas Court of Appeals (729 S.W.2d 768) held the “subject to” language did not prove, as a matter of law, that no contract existed. Intent to be bound was a jury question, weighed by four factors: an express reservation to be bound only by a signed writing, partial performance, agreement on all essential terms, and whether the deal’s size would normally call for a formal writing. The court cut the punitive award to $1 billion. Texaco later filed for bankruptcy and settled with Pennzoil for $3 billion.

The lesson for an investor: “subject to a definitive agreement” is weaker protection than a clear statement that neither side is bound until a PSA is signed.

Teachers Insurance v. Tribune (S.D.N.Y. 1987)

In Teachers Insurance & Annuity Ass’n v. Tribune Co., 670 F. Supp. 491, Judge Pierre Leval reviewed a commitment letter for a $76 million, 14-year loan tied to Tribune’s sale of the Daily News Building. He described two kinds of binding preliminary agreements. One is fully binding: everything that matters is agreed, including intent to be bound. The other is a “binding preliminary commitment”: major terms are agreed, some remain open, and both sides must negotiate the open terms in good faith. Tribune lost because, after rates fell, it refused to negotiate unless Teachers accepted a condition the letter never included. The Second Circuit later labeled these Type I and Type II preliminary agreements (Vacold LLC v. Cerami, 2d Cir. 2008).

A real estate LOI case: Channel Home Centers v. Grossman

In Channel Home Centers v. Grossman, 795 F.2d 291 (3d Cir. 1986), applying Pennsylvania law, an owner signed a detailed lease LOI promising to take a store off the market and negotiate to completion, used the letter to help get financing, then leased to a competitor. The Third Circuit held such a promise can be enforceable and sent the case to trial on intent. Exclusivity cuts both ways.

How state law changes the answer

There is no national LOI rule. State contract law controls, and results differ most on what you recover when someone breaks a promise to negotiate.

Jurisdiction	Key authority	Practical takeaway
Texas	Texaco v. Pennzoil (Tex. App. 1987)	Intent to be bound is a jury question; “subject to” phrasing alone may not save you
New York (federal courts)	Teachers v. Tribune; Vacold v. Cerami	Two-type framework; a Type II letter creates a duty to negotiate open terms in good faith
Pennsylvania	Channel Home Centers v. Grossman (3d Cir. 1986)	A detailed LOI with a promise to negotiate and pull the property off the market can bind
Delaware	SIGA Technologies v. PharmAthene (Del. 2013)	Expectation damages (lost profits) are possible for bad-faith negotiation if the deal would have closed
California	Copeland v. Baskin Robbins (Cal. Ct. App. 2002)	A contract to negotiate is enforceable, but recovery is limited to reliance damages such as out-of-pocket costs

The Delaware case involved a drug license, not property, but the lesson carries over. The term sheet said “Non Binding Terms” on every page, yet a later signed agreement required negotiating in line with it. Jones Day’s summary recommends expressly disclaiming any duty to negotiate, which is why the sample above does.

The Statute of Frauds and your signed LOI

Every state requires a contract for the sale of land to be in writing and signed by the party being held to it. That makes LOIs feel safe, but most statutes also accept a signed “note or memorandum,” and a signed LOI naming parties, property and price can look like one. Wording varies:

State	Statute	Key language
Texas	Bus. & Com. Code 26.01(b)(4)	Contract for the sale of real estate unenforceable unless it or a memorandum is in writing and signed by the person to be charged
California	Civil Code 1624(a)(3)	Invalid unless in writing and subscribed; an agent’s authority must also be in writing
New York	Gen. Oblig. Law 5-703(2)	Void unless the writing expresses the consideration and is subscribed; courts of equity may still enforce on part performance
Florida	Fla. Stat. 725.01	No action on a contract for the sale of lands unless in writing and signed by the party to be charged

An unsigned email chain about price is weak ground for forcing a sale. But once someone signs a detailed letter, the Statute of Frauds may not be the defense they assume. Your non-binding clause does the real work.

Worked example: LOI to PSA to assignment on an 8-unit

HYPOTHETICAL deal: A wholesaler finds a tired owner of an off-market 8-unit building through a mail campaign aimed at off-market landlords. The owner will not share a full rent roll yet but gives the basics.

1. Underwrite. 8 units at $1,050 per month equals $100,800 in gross potential rent. Less 5% vacancy gives $95,760. At a 45% expense ratio ($43,092), net operating income is $52,668.
2. Price it. If comparable small multifamily in the area trades near a 7% cap rate, value is about $752,400. The wholesaler needs room for an assignment fee and a buyer return, so the LOI offers $690,000 (a 7.6% cap on current NOI).
3. Send the LOI. Terms match the sample above, with a 5-day signature deadline.
4. Negotiate. The seller counters at $710,000; they settle at $695,000. Only the no-shop and confidentiality bind so far.
5. Convert to a PSA. Within a week the wholesaler sends a PSA mirroring the LOI with an express assignment clause. Title opens escrow and the deposit goes in.
6. Verify, then market. The T-12 shows actual NOI of $50,900 (higher water bills). The wholesaler updates the numbers before marketing.
7. Assign. A local buy-and-hold investor accepts an assignment at $720,000, a 7.07% cap on verified NOI. The assignment fee is $25,000, paid at closing. The buyer can test financed returns in our cash-on-cash calculator.

If no buyer bites, the wholesaler can cancel during due diligence and recover the deposit, because the PSA has a clean termination right. If the seller balks at assignment, a double close is the usual alternative.

Where beginners lose money with LOIs

• Treating the LOI as a lock. Without a PSA you usually have no right to buy, and sellers take higher offers during drafting.
• Overpromising. Writing “all cash, 10-day close” with no buyer and no funds burns you with that broker for good. Have a proof of funds letter if you claim cash.
• Stalling under exclusivity. Promise good-faith negotiation, then shop the deal for weeks, and you invite a claim.
• Wrong deal type. On a distressed single-family house, an LOI adds a step and gives the seller time to call someone else. Sign a contract instead.

On larger deals, or when binding clauses carry real money, have a real estate attorney in your state review the LOI and PSA.

Real estate letter of intent FAQ

Is a real estate letter of intent legally binding?

Usually only the parts written to be binding. Courts weigh the language, whether essential terms were settled, partial performance and conduct, so a clear non-binding clause near the signatures is your best protection.

Can a seller back out after signing an LOI?

Usually yes, as to the sale itself. They may still be liable if they break a binding no-shop or confidentiality clause, or if the letter created a duty to negotiate in good faith in a state that enforces those duties.

Can I assign an LOI?

Not really. The LOI is not a purchase contract; you assign the PSA. “And/or assigns” in the LOI just gets the seller comfortable early.

How long should exclusivity last?

Long enough to sign a PSA, often two to four weeks on small multifamily. Sellers resist long no-shops without a deposit.

Do syndicators use LOIs differently?

Same document, longer timelines. Sponsors in real estate syndication need extra time to line up investors and debt, so they build it into the LOI.

More on contracts and deal structure