Free Intent to Purchase Real Estate

Technically, the real estate includes only the land and the buildings and fixtures attached to the land. However, the parties may also intend that various other personal property items be included with the sale. It is best to specify in the Letter of Intent what items are to be included with the sale and what items the Seller expects to keep. Items such as a furnace are "attached" and are expected to be included with the sale; however, appliances and decorations are often "unattached" and the parties should specify which items will be included.

The Buyer may wish to have the Real Estate inspected, after a binding Purchase Agreement is signed by the parties, but before the closing. It is common to make the entire transaction subject to receipt of satisfactory results of such inspections.

When one party is interested in buying real estate from another party, they typically enter into a binding Purchase Agreement, which describes all of the important terms that have been agreed upon in connection with the sale. The Purchase Agreement is a binding contract, obligating the Seller to sell and the Buyer to buy, but it may be made subject to certain events, for example the Buyer successfully obtaining financing for the purchase and/or the Buyer's acceptance of the results of an inspection of the property. However, even before the Purchase Agreement is entered into, the parties may wish to sign an Intent to Purchase Real Estate (or "Letter of Intent").

The Letter of Intent can be either binding or non-binding, although it is more common to have a non-binding Letter of Intent which merely outlines the basic terms and conditions that are being proposed for the sale transaction. The Letter of Intent offered by this program is a non-binding Letter of Intent. By explicitly stating that the Letter of Intent is non-binding, the parties avoid the risk that one party may seek to enforce the Letter of Intent as a binding agreement or at least require the other party to continue to negotiate in good faith.

With the Letter of Intent, the parties can document the terms that they have already agreed upon, without locking themselves into a binding obligation to complete the transaction. This is useful to

1. minimize misunderstandings,
2. document progress already attained during negotiations,
3. provide a lender with some evidence of how the transaction is likely to be structured, and
4. [optional] prohibit the Seller from selling the property to any other party, or even negotiating for its sale, during the course of the current discussions.

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The Letter of Intent and the binding Purchase Agreement should specify a possession date, which is often the date of closing. Typically, the parties agree on a target date for possession, but allow for that date to be accelerated by mutual agreement.

The street address and/or the legal description of the property should be included. A legal description helps identify the exact real estate that is the subject of this Letter. The legal description should be entered, if known; however, oftentimes a street address is sufficient for the Letter of Intent. The legal description can be obtained from the abstract of title to the property, or from a title insurance policy, or it may be available from the local taxing authority responsible for real estate tax assessment and collection. Some legal descriptions are too lengthy for the space provided by this program. If that is the case, a copy of the legal description can be attached to the Letter of Intent as an exhibit. The legal description should be entered EXACTLY as it appears on the deed or other legal document.

The purchase price includes any "earnest money" (deposit) that is usually paid at the time that a binding Purchase Agreement is signed by both parties. The earnest money should be held by a trusted third party, for example a realtor or a bank, to be applied as part of the price at the closing, or to be returned to the Buyer if the transaction is canceled without fault on the part of the Buyer.

Most real estate is subject to various reservations or restrictions that place limits on the development and/or use of the property. In order to avoid surprises to the Buyer at some later time, all known restrictions should be included in the Letter of Intent. Examples include:

1. subdivision restrictive covenants,
   
2. city or county ordinances,
   
3. limitations on access to the property,
   
4. utility or other easements, or
   
5. reservation of mineral rights.

1. The Intent to Purchase Real Estate should be signed by the Buyer and submitted to the Seller for the Seller's consideration and signature. The Letter should be signed by all Buyers and by all Sellers.

2. It is not necessary that the document be witnessed or notarized.

3. Each party should retain a copy of the Letter immediately after that party signs the document.

4. The Seller should not take any action inconsistent with the "non-binding" nature of this document, such as allowing the Buyer to take possession of the property or to make improvements to the property.

5. After both parties have signed the Letter of Intent, it is expected that they will continue negotiations to finalize the details of the proposed sale. Such final details should be included in a new document, a Purchase Agreement, which will be a binding contract, obligating the Seller to sell and the Buyer to buy, although it may be made subject to certain contingencies. For assistance in preparing a Purchase Agreement, it is advisable to consult with a lawyer.

During the course of negotiations between the Buyer and Seller, the Buyer may request that the Seller pause from advertising or negotiating for the sale of the Real Estate with any other party. In other words, the Seller should "stand still" in the Seller's marketing efforts. The Seller may agree to this provision, but only if there are reasonable limits on the duration of the stand still period. Therefore, the Seller will insist on providing that if the parties are unable to agree to a binding purchase agreement by a certain date, the stand still restriction shall be void. The termination to the stand still may occur even sooner if the parties agree in writing to abandon their negotiations.

Even though the Letter of Intent will not create any obligation for further negotiations by either party, an exception can be carved out with regard to the stand still provision. In other words, if the parties so desire, the Seller can agree to be bound by the stand still provisions but not be bound with regard to any other obligations. This would allow the Seller to reject the terms of the Buyer's offer but show the Seller's commitment to continued negotiation.