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An issue we see often is that, because LOI’s are typically not binding, a seller may not raise concerns at that stage and will believe those terms can be “re-negotiated” in the Purchase & Sale Agreement. This leads to mistrust and deal delays.
And let’s remember – trust is important. I’ve worked through a lot of different challenges on a variety of deals, but an enduring theme is that some level of trust must exist between the buyer and seller to get a deal done efficiently. If there is no trust or trust erodes, it’s difficult to work through challenges and get to closing.
It’s better to discuss material issues at the LOI stage so both parties do not waste time and resources when there’s not a meeting of the minds.
I also recommend that the LOI be a short and concise document containing only the most important terms. A long LOI slows down deals and makes it more likely that you will do a second round of negotiations on particular issues when you negotiate the Purchase & Sale Agreement.
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About Beau Beach, CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@ProwessIRES.com