While not a legally binding document, a letter of intent lays out the basic requirements of a real estate transaction in clear, concise language. These documents tend to include a proposed time frame, purchase price, inspection requirements, and delivery time frames for relevant documentation. Letters of intent also give all parties an opportunity to negotiate before drawing up a final contract.
Without a letter of intent, buyers and sellers run the risk of going into a transaction without knowing all of the details. In today’s frothy hotel transaction market, letters of intent are also being used by some parties to tie up land or a particular property until they can figure out how to put a deal together to actually purchase it. This has become an all-to-common way to keep other monied interests away from an asset.
“There should be a lot of due diligence done on the front end of the deal before you pull the trigger on a letter of intent,” says LBA Hospitality’s Beau Benton. “It pays for landowners to know that what a company says it wants to do with a project is actually what it’s going to do. You don’t want to be surprised later when you go to complete a deal and it isn’t what you expected.”
