A letter of intent is preliminary agreement (generally non-binding) which outlines important terms of a desired transaction between parties. These terms can include things like price, timeframes, etc. Once all the terms have been successfully negotiated between the parties, the final LOI can be used as an outline for an attorney to draft a more formal contract.
There are several instances in which a letter of intent may be used, such as drafting one for an owner who may not have their property currently on the market in order to determine if they are interested in selling. However, it is generally common practice to utilize a LOI for properties that are actually listed for sale.
As long as the LOI is non binding, drafting the LOI does not constitute the unauthorized practice of law. However, there are some instances where you may still want to utilize an attorney to draft a letter of intent.
There is no set format for a LOI, but the language should be clear and simple. Here are a few tips that will help you draft a much more successful LOI:
Effective Title: Try to avoid using a title that may cause the document to be interpreted as a binding contract. The simplest title to use is: Non-binding letter of intent. The title should be followed with the description of the property or interest which is the subject of the LOI. If the LOI is for the purchase of Real Estate, I recommend including both the property address and county APN (Assessor Parcel Number).
Non-Binding disclosure: Although I previously recommended including this in the title, I would further recommend adding additional language explaining that the document is non-binding.
Binding provisions: This is the place to include any binding agreements; such as an agreement for all parties to negotiate in good faith, or to have the property removed from the market during negotiations.
Legal documentation: You will need to list the terms for any legal documents that will need to be drafted. These terms may specify the name of the attorney who will draft the final contract, or at least specify which party shall choose said attorney. You can also specify if a specific legal form shall be used when drafting the final contract.
List of Parties and contact info: All parties to the LOI should be listed along with their contact information such as: address, phone numbers, email addresses, fax numbers, etc.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
NAR designated: Short Sale & Foreclosure Resource
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Reno, Nevada (NV) 89521
Legal disclaimer: I am not an attorney, tax professional, modification specialist or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.