When you think about real estate, you probably picture buying and selling homes — but there’s a whole other world out there: commercial real estate. Whether it’s office spaces, restaurants, retail shops, or warehouses, commercial deals follow different rules and processes.

One of the biggest differences? The Letter of Intent (LOI).

What is a Letter of Intent (LOI)?

In residential real estate, most deals start with a formal offer to purchase. In commercial real estate, however, deals often start with an LOI — a document that outlines the key terms of a potential transaction before a full, binding contract is created.

Think of it as "a handshake in writing." It shows serious interest and lays the groundwork for both parties to negotiate the final details.

Key Elements Typically Included in an LOI:

• Purchase price or lease terms

• Timeline for due diligence and closing

• Contingencies (e.g., financing, inspections, zoning approvals)

• Responsibilities for closing costs

• Other special terms (like tenant improvements or seller financing)
  
  

Why is the LOI Important?

• Sets expectations early: Both buyer and seller align on big-ticket terms before investing in attorneys or due diligence.

• Saves time and money: Clarifying deal points upfront helps avoid costly misunderstandings later.

• Framework for negotiations: Provides a structure that attorneys can later turn into a detailed Purchase Agreement or Lease Contract.
  
  

Is an LOI legally binding?

Most of the time, NO. An LOI is typically non-binding regarding the transaction itself. However, certain parts — like confidentiality agreements or exclusive negotiation periods — can be binding, depending on how it's written.

Why This Matters for Residential Buyers & Sellers:

If you've ever thought about investing in rental properties, owning a small business, or expanding your real estate portfolio, understanding the basics of commercial transactions gives you a big advantage.

Learning how LOIs work can prepare you to:

• Move quicker when commercial opportunities arise

• Understand the negotiation process

• Spot great deals before they hit the broader market
  
  

Final Thought:

Commercial real estate isn't just for "big investors." Many residential clients are branching into commercial deals for cash flow, business use, or wealth-building. Starting with knowledge about tools like the LOI can help you make smarter moves — when the time is right.

Ready to explore both residential and commercial real estate opportunities? We're here to help!