LOI Dilligence expectations & Earnest Money

April 06, 2026

by an investor from Purdue University - Krannert School of Management in Portland, OR, USA

I am going back and forth on an LOI and the broker is pushing for earnest money and diligence timelines under a month. I am working with a SBA Broker that is giving me timelines of 60 days to submit and 90 days to close. 2 questions. 1. What is a reasonable to hold a buyer accountable to in terms of earnest money? AKA, can't pull out except for financing contingency after X amount of time. 2. What is reasonable to hold a seller accountable to since I am going to be putting in meaningful due diligence resources? I see some LOI's with penalty clauses to reimburse for diligence costs but am unclear what specific scenario's outside of selling to someone else would trigger those expenses. Are there scenario's where just getting cold feet and pulling out would drive that as well or is that not usually done?

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

It is not uncommon for a seller or broker to want some earnest money. Of course as a buyer you want to avoid it if possible, but it is not completely uncommon. However, the timeline needs to make sense. Usually I find a compromise can be reached by putting performance metrics into the LOI. First and foremost, the earnest money needs to be fully refundable if you cannot hit a performance metric. You can tie the performance to certain items. I have seen benchmarks such as; 1) file submitted to lenders: 2) LOI received; 3) Commitment letter received; 4) third party reports back; and 5) clear to close or closing date. You might be able to secure a longer diligence time period by having such benchmarks in place. Like two weeks to secure terms, 4 or 5 weeks for approval, and 60 to 75 days to close. Also providing a pre-approval in advance of going under LOI might help give the broker confidence you can perform. If you need any help assessing the transaction you can reach me here or directly at redacted Good luck with the negotiations.

Reply by an intermediary
in New York, NY, USA

It needs to go both ways, if the seller walks during exclusivity for no reason (no retrade) then whatever $ figure is being put up by the buyer should also be paid by the seller, and both should be held in escrow. On timelines, 30 days of DD is not market for anything beyond a very simple deal, push for milestone-based progression tied to data room access and document delivery, so the clock doesn’t run while you’re waiting on the seller.

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