What is a letter of intent in commercial real estate?
A letter of intent (LOI) opens a CRE acquisition. What an LOI is, whether it is binding, what it should include, and how it leads to the PSA.
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.
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 before the purchase and sale agreement is signed without legal consequence. Specific provisions such as exclusivity and confidentiality are commonly carved out and drafted to remain binding on their own.
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.
- 1.Adventures in CRE, Letter of Intent (Glossary) (accessed 2026-07-01)
- 2.Feldman Equities, What Is a Letter of Intent in Commercial Real Estate (accessed 2026-07-01)
- 3.Taft Law, Letters of Intent in Commercial Real Estate Transactions (accessed 2026-07-01)