LoI's - Binding? Non-binding?

by an investor from University of California, Berkeley - Haas School of Business

6 years ago

I'm running my search a bit differently than most and leveraging brokers probably more heavily than others are, as I do not have full-time to devote to beating the bushes and I'm constraining my geographic area, so I'm working with brokers that specialize in my local area.
Brokers seem to want LoI's to be binding, but my attorney and others say that there is no need for a LoI to be binding.  Would like some opinions from you all who have a lot of experience in this area.

16 likes
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12 comments

searcher from King's College London, University of London

interesting

7 months ago | like reply | 0 likes

searcher from Harvard University - Harvard Business School

Excellent comment from Tim. The LOI is the very beginning of the process and is meant to determine if there is a general mutual agreement. Your search will die if you incur legal fees for every LOI--you have to save those funds for when you're further along in the process. Like S. Bruce pointed out, in my deal I made a $10k refundable deposit basically to demonstrate that I was serious and I submitted bank statements to show I had the funds for my downpayment. I can understand a seller not wanting to go exclusive without at least a small deposit and proof of funds. But I did walk away from a deal where the broker was demanding 10% down, "refundable" according to the document she had drafted. It wasn't safe without paying my attorney to review, and it didn't make sense at that stage.

5 years ago | like reply | 0 likes

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