What is a letter of intent?
Broadly speaking, a letter of intent states the intentions of the author, but it does not, generally, bind the author to act out the stated intentions.
What is a letter of intent in real estate?
In real estate, a Letter of Intent is a sort of pre-contract and can include both binding and non-binding provisions. LOIs are a means of reducing the risk of litigation, and their purpose is for the parties which intend to negotiate to agree on elements of the ensuing negotiations. Depending on the contents, letters of intent can transition into being fully binding contracts (“failed letters of intent”)
What is the purpose of a letter of intent in real estate?
There are several reasons why a Letter of Intent, whether binding or non-binding, would be necessary, in real estate. These reasons include, but are not limited to:
– Clarifying which key points of a transaction need to be negotiated
– A means of announcing future negotiations (for example, if two real estate companies intend to negotiate a merger or if one real estate company intends to negotiate a separation)
– To state provisions which offer certain protections to the parties involved, during the contractual negotiations
– To provide an overview of the purchase details before the real estate transaction binding agreement is formulated
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