CRE 101 · deweyluong.realtor

Letter of Intent (LOI) Explained: The Terms That Decide a Georgia Commercial Deal Before the Contract

Most commercial deals are won or lost before a purchase contract exists. The letter of intent is where price, earnest money, due diligence time, and financing are agreed in principle — and where a vague page costs real money later. On the made-up Gwinnett deal on this page, the seller asks $2,600,000, the buyer's LOI opens at $2,400,000 with $50,000 earnest money and a 45-day due diligence period, and the counter lands at the $2,500,000 midpoint. Every one of those numbers was decided at the LOI stage, not in the contract. By Túy “Dewey” Luong, CCIM — Founding Broker, SERHANT. Atlanta · 318 closed sales / $281.2M career volume · 678-707-2498

The worked example uses made-up, rounded numbers to teach the mechanics. This page is general education, not financial or legal advice.

What an LOI is — and what it is not

• The idea: an LOI is a short written statement of the business terms both sides can accept — price, deposit, timelines, contingencies — signed or countersigned before anyone pays lawyers to draft a full purchase and sale agreement (PSA).
• Non-binding, with exceptions: a properly drafted LOI states that the business terms are not binding until a PSA is executed. Clauses on confidentiality, exclusivity (no-shop), and governing law are often written to be binding even in an otherwise non-binding LOI. The label on the first page does not control — the wording inside does. Have counsel review before signing.
• Why it exists: contracts are expensive to draft and redline. The LOI settles the five or six numbers that actually decide the deal, so the PSA negotiation is about legal protection, not about re-trading price.
• What it is not: an LOI is not a contract, not an appraisal, and not a commitment to close. Either side can walk away before the PSA — which is exactly why the terms still have to be written as if they will hold.

The terms that belong in every commercial LOI

• Price and what it buys: the exact price, the property and parcels included, and any personal property or business assets in or out.
• Earnest money: how much, who holds it, when it is delivered, and when it goes hard (non-refundable). Earnest money is the buyer's credibility in dollar form.
• Due diligence period: the length of the inspection window, what the seller must deliver and when, and whether the clock starts at PSA execution or at delivery of the seller's documents — that distinction can be worth two weeks. See the due diligence lesson.
• Financing terms: loan amount or loan-to-value, the lender timeline, and whether there is a financing contingency at all. A seller reads a financing paragraph the way a lender reads a file.
• Closing timeline: how many days after due diligence ends, and who pays which closing costs.
• Exclusivity and PSA window: how many business days the sides have to produce a signed PSA, and whether the seller stops marketing the property while they do.
• Brokerage: who represents whom and how commissions are handled, stated up front instead of discovered at the closing table.

Worked example. The numbers below are made up and rounded to teach the mechanics. This is not a real property.

• The property: a Gwinnett retail building, asking price $2,600,000.
• The buyer's LOI: price $2,400,000 (about 92% of ask), earnest money $50,000 (about 2.1% of the LOI price), 45 days of due diligence starting when the seller delivers its document package, financing at 65% of price — a $1,560,000 loan against $840,000 of buyer equity — and closing 30 days after due diligence ends. Total LOI-to-close runway after the PSA: 45 + 30 = 75 days.
• The seller's counter: $2,500,000 — the exact midpoint of ask and LOI ($2,600,000 + $2,400,000) ÷ 2 — with earnest money unchanged and a 10-business-day window to sign the PSA.
• What the counter really says: the seller moved $100,000 and the buyer is asked to move $100,000. Splitting the difference is the most common ending in commercial negotiation, which is why the opening LOI price has to be defensible from real numbers — cap rate, DSCR, and the property's actual rent roll — not a guess with room built in.
• The term that mattered most: not price. The due diligence clock starting on document delivery, not PSA signing, protected the buyer's full 45 days. On a property with leases, environmental questions, or a survey to order, that one sentence is worth more than the last $25,000 of price.

Four LOI traps

• The one-line LOI: "Buyer offers $2,400,000, terms to follow" buys nothing. Every missing term becomes a second negotiation after the seller has already anchored on the price — and the re-trades are rarely in the buyer's favor.
• Binding by accident: leaving out the non-binding statement, or signing a seller's form LOI with binding language buried in it, can create obligations neither side intended. The exclusivity and confidentiality clauses are binding in many forms even when the price terms are not.
• A due diligence clock that starts too early: if the period runs from PSA execution but the seller's leases, surveys, and financials arrive on day 12, the buyer just lost a quarter of the window. Tie the start to document delivery, and name the delivery deadline.
• An LOI the lender cannot underwrite: a price with no stated loan structure, or a closing date no lender can meet, signals an unserious buyer. Sellers and their brokers check the financing paragraph first — a realistic 65% loan with named equity reads stronger than a higher price with silence behind it.

Cho nhà đầu tư người Việt

Letter of Intent (LOI) là văn bản ngắn ghi lại các điều khoản chính của một thương vụ bất động sản thương mại trước khi hai bên ký hợp đồng mua bán (PSA): giá, tiền đặt cọc (earnest money), thời gian thẩm định (due diligence), điều kiện vay vốn và ngày closing. Trong ví dụ trên trang này (số liệu giả định): người bán rao $2.600.000, LOI của người mua mở ở $2.400.000 với earnest money $50.000 (khoảng 2,1%), due diligence 45 ngày tính từ khi người bán giao đủ hồ sơ, vay 65% tương đương $1.560.000 và vốn tự có $840.000, closing 30 ngày sau khi hết hạn thẩm định — tổng cộng 75 ngày. Người bán counter ở $2.500.000, đúng điểm giữa. Ba lưu ý: LOI thường không ràng buộc về giá và điều khoản kinh doanh cho đến khi PSA được ký, nhưng điều khoản bảo mật và độc quyền đàm phán có thể vẫn ràng buộc; đồng hồ due diligence nên tính từ ngày nhận đủ hồ sơ, không phải ngày ký PSA; và một LOI ghi rõ cấu trúc vay luôn được người bán đánh giá cao hơn một LOI chỉ ghi giá cao mà không nói gì về tài chính. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý hay tài chính.

Frequently asked questions

What is a letter of intent in commercial real estate?

A letter of intent (LOI) is a short written statement of the business terms a buyer and seller can accept — price, earnest money, due diligence period, financing, and closing timeline — agreed before lawyers draft the full purchase and sale agreement. In the worked example on this page, a made-up Gwinnett property asked at $2,600,000 draws an LOI at $2,400,000 with $50,000 earnest money, 45 days of due diligence, a 65% loan ($1,560,000) against $840,000 of equity, and closing 30 days after due diligence — a 75-day runway — and the seller counters at the $2,500,000 midpoint.

Is a letter of intent legally binding in Georgia?

Generally the business terms of a properly drafted LOI are not binding until a purchase and sale agreement is executed, and the LOI should say so expressly. Some clauses — confidentiality, exclusivity or no-shop, and governing law — are commonly written to be binding even in a non-binding LOI, and careless wording can create obligations neither side intended. This page is general education, not legal advice; have Georgia counsel review any LOI before signing.

What terms should a commercial LOI include?

At minimum: the exact price and what is included, earnest money amount, holder and go-hard terms, the due diligence period and what starts its clock, the financing structure or an all-cash statement, the closing timeline and cost split, an exclusivity and PSA-signing window, and brokerage representation. A missing term is not a neutral term — it becomes a second negotiation after price has already anchored.

What happens after a seller accepts an LOI?

The sides move to draft and sign the purchase and sale agreement inside the window the LOI sets — 10 business days in the worked example. Once the PSA is executed, the due diligence clock runs (45 days in the example, starting on the seller's document delivery), earnest money is delivered to the holder, and closing follows the LOI timeline, 30 days after due diligence ends in the example. Until the PSA is signed, either side can still walk away, which is why speed to a signed PSA matters.

LOI là gì, nhà đầu tư người Việt cần lưu ý gì?

LOI (Letter of Intent) là văn bản ghi các điều khoản chính trước khi ký hợp đồng mua bán: giá, earnest money, thời hạn due diligence, cấu trúc vay và ngày closing. Ví dụ trên trang này (số liệu giả định): giá rao $2.600.000, LOI mở $2.400.000, earnest money $50.000 (khoảng 2,1%), due diligence 45 ngày tính từ khi nhận đủ hồ sơ, vay 65% = $1.560.000, vốn tự có $840.000, closing sau 30 ngày — tổng 75 ngày; người bán counter $2.500.000 đúng điểm giữa. Ba lưu ý: điều khoản giá thường không ràng buộc cho đến khi ký PSA nhưng điều khoản bảo mật và độc quyền có thể ràng buộc; đồng hồ thẩm định nên tính từ ngày nhận hồ sơ; LOI ghi rõ tài chính luôn mạnh hơn LOI chỉ ghi giá. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý hay tài chính.

This page is general education, not investment, legal, tax, lending or financial advice. Every figure in the worked example is made up and rounded to teach the mechanics. Túy “Dewey” Luong, CCIM — Founding Broker, SERHANT. Atlanta · 678-707-2498 · dewey.luong@serhant.com