Is a letter of intent binding in commercial real estate?

Most CRE letters of intent are drafted to be non-binding, and either party can walk away from a non-binding LOI without legal consequence. Courts can treat an LOI as an enforceable contract if the parties manifest an intention to be bound and the document contains the deal's essential terms, which is why well-drafted LOIs state expressly that they create no binding obligation. Specific provisions such as exclusivity and confidentiality are commonly carved out and drafted to be binding on their own. The law varies by state, so parties typically involve counsel before signing.

What should a commercial real estate LOI include?

A purchase LOI typically states the proposed purchase price, the earnest money deposit and when it becomes non-refundable, the length of the due diligence period, the expected closing timeline, financing and other contingencies, and an expiration date for the offer. Many also include an exclusivity provision that takes the property off the market while the purchase and sale agreement is negotiated. The document usually runs one to three pages and leaves legal detail to the PSA.

How long is a typical LOI?

Most commercial real estate LOIs run one to three pages. The document is deliberately short because it covers business terms only, such as price, deposit, due diligence period, and closing timeline. Legal terms like representations and warranties, default remedies, and prorations are left to the purchase and sale agreement, which typically runs 30 pages or more.

What happens after an LOI is signed?

Once both parties sign the LOI, the seller's and buyer's attorneys negotiate the purchase and sale agreement, which converts the LOI's business terms into a binding contract. PSA negotiation commonly takes one to three weeks. The PSA's effective date then starts the due diligence period, during which the buyer inspects the property and can typically terminate and recover its deposit. Closing follows the end of due diligence, often within two to four weeks.

Can a buyer back out after signing an LOI?

Under a properly drafted non-binding LOI, yes. Either party may terminate negotiations at any point before the purchase and sale agreement is signed, usually without penalty. The practical costs are reputational, since brokers and sellers remember buyers who retrade or walk without cause. Any binding carve-outs in the LOI, such as confidentiality, survive the end of negotiations.

What is the difference between an LOI and a purchase agreement?

The LOI is a short, mostly non-binding outline of business terms that the parties use to agree on the shape of the deal. The purchase and sale agreement is the binding contract that follows it, adding representations and warranties, title and survey procedures, closing conditions, default remedies, and the enforceable deadlines that govern the transaction. A deal can die at the LOI stage with little consequence. After the PSA is signed, walking away has defined costs, usually measured by the earnest money deposit.

What Is a Letter of Intent in Commercial Real Estate?

MotionCRE Editorial

Written by the MotionCRE team.

Published July 1, 2026

A letter of intent (LOI) is a short, mostly non-binding document a buyer submits to outline the proposed terms of a commercial real estate purchase, typically covering price, earnest money deposit, due diligence period, closing timeline, and contingencies. It settles the business terms of the deal before either side spends legal fees drafting a binding purchase and sale agreement. Certain provisions, commonly exclusivity and confidentiality, are often drafted to remain binding even though the rest of the document is not.

What an LOI does in a CRE acquisition

Adventures in CRE defines the letter of intent as a non-binding legal document used to communicate the high-level business terms of a real estate transaction, typically submitted by the buyer early in the purchase process. In practice it is the buyer's formal opening move: underwriting supports a number, the buyer puts that number and a handful of key terms on one to three pages, and the broker carries it to the seller.

The document exists because binding contracts are expensive to negotiate. A purchase and sale agreement takes attorneys on both sides one to three weeks to draft and mark up. Nobody wants to spend that money before the parties agree on price, deposit, timing, and contingencies. The LOI settles those business terms first, cheaply, so legal spend only starts on deals that have a real shape.

The short format has a second advantage for buyers. As Feldman Equities notes, an LOI is a simple, one-to-three page document, which means a buyer can submit LOIs on several properties at once without committing to any of them. Active acquisition teams treat LOIs as a volume instrument: a shop screening 15 deals a month might put out 3 to 5 LOIs and expect to sign 1 or 2.

The terms a typical purchase LOI covers

Terms vary by deal and market, but most purchase LOIs cover the same short list. The ranges below reflect common practice described in the cited sources; every one of them is negotiable.

Term	What it specifies	Market-typical treatment
Purchase price	The offer, sometimes with the pricing basis (per unit, per SF)	Fixed dollar amount
Earnest money deposit	Amount, escrow holder, and when it goes non-refundable	Sized to the deal; the Adventures in CRE example deal uses $50,000, refundable during due diligence
Due diligence period	The buyer's inspection window after PSA execution	30 to 90 days per Feldman Equities; 30 to 60 is common on stabilized assets
Closing timeline	Days from due diligence expiration to closing	Often 15 to 30 days; the Adventures in CRE example closes 15 days after a 30-day due diligence period
Contingencies	Conditions that let the buyer exit, most commonly financing	Stated plainly, negotiated hard by sellers
Exclusivity	Seller agrees to stop marketing the property	A defined window, usually matching the expected PSA negotiation period
Expiration	How long the offer stays open for acceptance	A short, stated deadline

Two of these deserve attention beyond the table. The due diligence period is usually the most negotiated timing term, because it defines how long the seller's asset is tied up with a refundable deposit. And the deposit structure, specifically how much goes hard and when, is how sellers separate serious buyers from optionality shoppers.

Non-binding, with binding carve-outs

The standard framing is that an LOI is non-binding and a PSA is binding. That is true as a default, but the line is drawn by drafting, in both directions.

An LOI can become enforceable by accident. Taft Law's bulletin on CRE letters of intent notes that courts can treat an LOI as a binding agreement when the parties manifest their intention to be bound by the letter's terms and the letter includes the agreement's essential terms. Without both elements, courts generally treat the document as an unenforceable agreement to agree. The standard protection is an express statement that the LOI creates no binding obligation and that neither party is bound until a definitive agreement is executed. State law varies here, which is one of several reasons LOIs still get a legal read before signature.

The reverse also happens on purpose. Parties commonly draft specific provisions to survive as binding obligations even inside an otherwise non-binding LOI. The usual carve-outs are exclusivity (the seller agrees to stop marketing the property for a defined window), confidentiality (deal terms and shared materials stay private), and sometimes an allocation of costs or a governing-law clause. A buyer who signs an LOI with a binding exclusivity provision has bought something real: a period where the seller cannot shop the buyer's number to other bidders.

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From LOI to PSA: a worked timeline

A useful way to hold the whole sequence in your head is a two-lane rule: business terms live in the LOI, legal terms live in the PSA. Price, deposit, due diligence length, closing timing, and exclusivity belong in lane one. Representations and warranties, title procedures, default remedies, and prorations belong in lane two. When LOI negotiations bog down, it is often because someone dragged a lane-two term into lane one.

Here is a representative timeline for a stabilized asset, using the ranges from the table above:

Day 0: Buyer submits the LOI with a 7-day expiration.

Days 2 to 8: Seller counters on price and deposit structure. One or two rounds of markups, usually traded through the broker.

Day 10: LOI signed. Exclusivity begins. Seller's counsel starts the PSA draft.

Days 10 to 28: PSA negotiation. The business terms are already set, so the markups concentrate on reps and warranties, title procedure, and remedies.

Day 28: PSA executed. The effective date starts the due diligence period, and the earnest money deposit goes into escrow.

Days 28 to 73: A 45-day due diligence period. Third-party reports, lease and financial review, title and survey work.

Day 88: Closing, 15 days after due diligence expiration.

Call it roughly 90 days from first offer to keys, with the LOI consuming the first 10. Deals with financing contingencies, complex title, or entitlement questions run longer at almost every step.

The points buyers and sellers actually negotiate

Most LOI negotiations concentrate on a few pressure points:

Price and pricing basis. Beyond the headline number, sellers watch for retrade setups: vague language about adjustments after inspections invites a price cut in week five.

Deposit size and hardening schedule. Sellers push for a larger deposit and an earlier go-hard date. Buyers push for the full deposit to stay refundable through due diligence expiration.

Due diligence length. Every extra week of due diligence is a week of free optionality for the buyer and dead time for the seller. This is where competing bidders differentiate: a buyer confident in its process can offer 30 days when others ask for 60.

Exclusivity. Buyers want it long enough to cover PSA negotiation. Sellers want it short so a stalled negotiation does not strand the asset off-market.

Contingencies. All-cash offers with no financing contingency routinely beat higher offers that carry one. The LOI is where that trade is made visible.

Closing extensions. Some LOIs sketch extension rights (for example, one 15-day extension in exchange for an additional deposit). Sketching it early avoids a fight in the PSA.

None of this is legal advice, and terms move with negotiating power: in a bidding war the seller's form wins, and in a cold market the buyer's does.

Tracking LOIs across a pipeline

A single LOI is easy to manage. Five open LOIs across three markets, each with its own expiration date, counter history, exclusivity window, and pending PSA draft, is where teams start losing track of which version of which offer is live. An LOI that quietly expires while the team debates a counter is a self-inflicted dead deal.

This is the stage MotionCRE's pipeline board was built around: every deal sits in a stage (screening, underwriting, LOI, under contract), days-in-stage is visible, and each deal's workspace holds the LOI versions, the counter history, and the key dates for expiration and exclusivity. The team sees every open offer in one view instead of reconstructing it from email threads on Monday morning.

For the operating system around this stage, see how to manage an LOI pipeline, and steal the LOI tracker template if you run this in a spreadsheet today. When the LOI is signed and the lawyers take over, the next document in the chain is the purchase and sale agreement.

Browse more playbooks, templates, and definitions in the MotionCRE resource library.

What is a letter of intent in commercial real estate?