Letter Of Intent
A letter of intent (LOI) is a written outline of the basic terms you’d offer for a property — it’s a serious expression of interest, but it’s usually not a binding contract.
LOIs are more common in commercial real estate than residential. But in certain situations — new construction, off-market deals, or luxury properties — residential buyers use them too. The LOI says: “Here’s what I’m thinking. Are we in the same ballpark?”
It saves both parties from spending money on attorneys and inspections before they even agree on the basics.
What’s in a Letter of Intent?
- Proposed purchase price
- Earnest money amount
- Proposed closing date
- Key contingencies (financing, inspection)
- Due diligence period
- Expiration date for the LOI itself
On a $350K home, an LOI might be one to three pages. It covers the deal points without the 15–20 pages of legal language in a full purchase agreement.
Is an LOI Binding?
Usually not. Most LOIs include specific language saying they’re non-binding. But some provisions within the LOI can be binding — like confidentiality clauses or exclusivity periods. Read the fine print, or better yet, have your attorney review it.
Watch out for: Signing an LOI with a binding exclusivity clause that locks you into negotiating with one seller for 30–60 days. If the deal stalls, you’re stuck waiting while other properties slip away. Keep exclusivity periods short — 7–14 days is plenty to determine if the deal has legs. Your buyer’s agent can advise on what’s standard in your market.
Do I need a letter of intent for a regular home purchase?
For most residential purchases, no. You go straight to a purchase agreement. LOIs make sense for complex deals — commercial properties, new construction where terms are flexible, or off-market negotiations where neither party wants to hire lawyers before testing the waters. Use our mortgage calculator to figure out your numbers before writing any offer, LOI or otherwise. Check our glossary for purchase agreement details.