What Is a Letter of Intent to Purchase?
A letter of intent to purchase marks the first step in serious negotiations between a buyer and a seller. It signals intent to move forward with a deal, while leaving room for both sides to refine the final agreement.
Unlike a purchase agreement, an LOI is generally non-binding. Its value lies in setting expectations, reducing misunderstandings, and creating a clear path toward a final contract. LOIs are common in business sales, real estate transactions, and major asset purchases, where setting expectations early keeps conflicts to a minimum.
Purchase Letter of Intent – by Type
Business
Serves as a preliminary agreement outlining the terms of a business sale between the seller and a interested buyer. You will need a Business Purchase Agreement to finalize the deal.
Real Estate
Used in commercial real estate transactions between a seller and a prospective buyer. You would need a Real Estate Purchase Agreement to complete the deal.
Personal Property
Used for the sale of personal property, such as cars, jewelry, or other individual items, between a seller and a potential buyer. You would also need a Personal Property Purchase Agreement to complete the deal.
When to Use a Letter of Intent to Purchase
A letter of intent to purchase is most helpful at the beginning of negotiations, before a full purchase agreement is drafted. It creates a record of the main terms and shows that both sides are serious about moving forward. You’ll want to use an LOI when:
- Negotiations are just starting, and you need a clear framework
- Both parties want to capture the main terms early, such as price and payment structure
- Due diligence is required, and the LOI will help guide the process
- You want to show commitment to the deal without being bound to every detail
By setting expectations early, an LOI keeps talks structured while leaving flexibility to finalize the contract later.
Benefits of a LOI to Purchase
- Saves time and avoids confusion
- Shows good faith and serious intent
- Clarifies key terms before legal fees add up
- Keeps negotiations clear and organized
- Builds a solid base for due diligence
How to Write a Letter of Intent to Purchase
A strong letter of intent to purchase should cover the essentials without overwhelming detail. The best way to approach it is by working through the main questions both sides need answered before a final agreement.
- Who are the parties? List the buyer and seller by name and include full contact information. This makes sure there’s no doubt about who is part of the agreement.
- What is being purchased? Provide a clear description of the asset or item. Specific details help both sides stay aligned and reduce the chance of misunderstandings.
- What are the financial terms? State the purchase price, explain how payment will be made, and add any important dates. You can also include a clear payment plan so both sides know what to expect. These details give the deal its structure.
- Are there limits or disclaimers? Note what the letter covers and what it doesn’t. This keeps expectations realistic as negotiations continue.
- Do you need optional clauses? Consider including exclusivity or confidentiality. These clauses protect sensitive information and show commitment during talks.
- What contingencies apply? Outline delivery terms, inspection rights, or conditions related to the asset’s state. These protections add clarity if issues come up later.
- How does the letter close? Add signatures, the date, and a statement that the LOI is non-binding unless certain clauses are meant to be binding. This sets the right expectations.
- Has it been reviewed? Have a lawyer look over the draft before signing. A legal review confirms the LOI protects both parties and follows the law.
When you draft a letter of intent to purchase, the aim is not to finalize every detail. It’s to create a reliable framework that guides negotiations, builds trust between the parties, and prepares both sides for the final agreement.
Next Step After an LOI
An LOI sets the groundwork for the deal. The next move is signing a purchase agreement, which turns those agreed-upon terms into a binding contract with full legal protection.
Sample Letter of Intent to Purchase
If you’re looking for guidance, a sample of LOI to purchase can show you how the key parts fit together in practice. Our letter of intent to purchase template makes it easy to fill in your details and then download the document in Word or PDF for quick use.
