Many real estate transactions may seem straightforward, but all kinds of pitfalls can arise that may make or break a deal. One important document that has the potential to get you in a bind is the letter of intent. You may not think of a simple letter as a legally binding contract, but sometimes it can be. To ensure your interests are protected, it’s vital to seek the counsel of an experienced contract attorney who is well-versed in Pennsylvania law to draft and review all documents involved in your real estate transaction.
What is a letter of intent?
A letter of intent is an informal document that establishes certain terms of a proposed deal. They are commonly used in commercial real estate transactions, but may be utilized in more complex residential deals such as FSBO transactions that involve selling or buying property without a real estate agent. Letters of intent do have advantages—they can get the ball rolling on a real estate deal, help buyers provide documentation to secure financing and set forth terms that can be negotiated before a legally binding real estate purchase agreement is drafted.
How can a letter of intent be legally binding?
Under Pennsylvania law, a letter of intent can be legally enforceable if it outlines crucial terms of a real estate deal, including purchase price, property description, the buyer’s and seller’s names and a specific closing date. A letter of intent must clearly state that the parties do not intend for it to be legally binding in order for it to avoid becoming enforceable down the road.
A skilled real estate attorney will know the specific language to include in your letter of intent to ensure that it is non-binding. Your letter of intent should clearly state that the deal is contingent upon all parties entering into a fully negotiated and executed final agreement, which can protect you from being legally bound by terms set forth in the letter. Your lawyer may also include other items, such as a specific date for buyers to complete due diligence to prevent the transaction from dragging on or having the buyer turn around and say the letter of intent is legally binding months later.
Do you need a letter of intent for your real estate transaction?
A real estate lawyer in PA can also advise you on whether you need a letter of intent at all. Depending on the circumstances, if all parties are satisfied with the initial terms, a letter of intent may not be necessary.
A Real Estate Lawyer Will Protect Your Rights and Interests
Whether you’re buying or selling a home or commercial property, our West Chester real estate lawyers provide invaluable legal advice and resources that will save you time and money and help you avoid common mistakes that occur during the real estate transaction process. At Carosella & Associates, we guide you through the process every step of the way and help make your real estate transaction smooth sailing from start to finish.