Deposit with LOI?

November 29, 2017
by a searcher from Harvard University - Harvard Business School
I am dealing with a broker who is pushing for a large deposit (5-10%) to accompany an LOI. This seems unusual to me--in other potential deals I have submitted LOIs with no deposit and then had a 30-day exclusivity period to start working on the major due diligence and start drafting a P&S.
I would love to hear thoughts from others on whether asking for a deposit to accompany an LOI is customary.
Many thanks.
from University of Pennsylvania in Chicago, IL, USA
from University of Southern California in North Palm Beach, FL, USA
Don’t pay to peek.
Never make an earnest money deposit or sign a purchase contract—no matter how many contingencies are in it—before you and your advisors have analyzed the company, obtained an expert opinion of value and defined alternative terms of purchase.
If you doubt the wisdom of this advice, make an offer on a business you don’t really care about. Later, when you think you know what it is worth, try explaining to the seller why your offer must change.