How to Write a Perfect Real Estate Offer Letter
So, you’re ready to make an offer on a commercial property?
Buying commercial real estate is a big, risky business venture. Because of this, it’s important to understand as much about the business deal as possible before the dealings are finalized. It’s essential to partner with the right commercial real estate agent and make sure the property is a good investment, so you’ll want to do your due diligence first.
However, you will get to a point where you need to make an offer on an investment property. If a piece of commercial property is particularly popular, you might find yourself in the midst of a bidding war. In some cases, bids and counterbids can go back and forth for months. Some potential buyers may drop out of the running, but eventually, the seller will have to accept an offer, which doesn’t always have to be the highest offer on the table.
The bottom line is you’ll need to stand out as a buyer, and one of the best ways to do this is by crafting a commercial real estate offer letter that details why your offer is the best one.
Here’s how you can go about it.
Your Ultimate Guide to Crafting an Offer Letter
An offer letter, or letter of intent (LOI), allows you to make an offer on a commercial property without all the terms and clauses included in an actual sales contract. It basically details the terms and provisions of the proposed real estate transaction, which will inform the negotiations going forward.
Few things can be more time-consuming, complicated and “by the book” than commercial real estate transactions. The LOI signifies that you want to make a purchase and are willing to start the negotiations process. A commercial real estate broker will typically be the one to write an offer letter, but you can also draft one yourself as the buyer. It’s also a good idea to know what’s included in an offer letter so you can ensure you’re getting the best services possible.
A few key elements:
Start your offer letter with an introductory paragraph stating your intent to purchase the mentioned commercial property. This section should provide a general summary of the purpose of the offer letter – whether that’s buying or leasing commercial property.
2. Parties involved
Name the parties involved in the real estate transaction, including the buyer, seller, real estate agent and any other relevant third party with a stake in the process. Doing so clarifies the legal and financial responsibilities of the parties involved.
3. Property description
Include a description of the property, including the address and lot boundaries.
4. Outline the terms of the offer
State the terms of the offer, including the intended purchase price, details of the financial lender, as well as any caveats or disclaimers that may affect the terms of the agreement. Negotiations typically happen in good faith, so it’s important to list the reasons why you may change your mind about purchasing the property.
5. Closing statement and signatures
Summarize the main points of the offer letter. An offer letter is only valid if you sign it. However, it’s important to note that this does not make the document legally binding.
Commercial Property Offer Letter Template
Here’s a sample letter of intent to help you get started. Note: All details in this offer letter template are fictional.
Commercial Purchase Letter of Intent
Effective Date: July 20, 2022
RE: Intent to Purchase Commercial Property
Here’s where you declare the overall goal of this non-binding contract.
Smith Investments Inc., henceforth referred to as the “Buyer.”
James Williams, henceforth referred to as the “Seller.”
12 N. Whoville, Clearwater, FL. 00000 (the “Property”).
The Buyer shall purchase the Property for One Million Two Hundred Thousand Dollars ($1,200,000.00) (the “Purchase Price”)
Payment of the Purchase Price shall be made in the following manner:
A 20% cash deposit upon signing a Purchase Agreement
Financing from the Buyer’s financial institution to cover the remaining 80%.
Purchase of the Property is contingent on the Buyer’s ability to obtain financing. The Buyer must, therefore, show proof of financing within ten (10) business days of signing a Purchase Agreement.
Closing Costs and Terms
All costs associated with the Closing shall be the responsibility of the Buyer. Any adjustments to the Closing period must be agreed upon in writing by the Buyer and Seller.
Possession of the Property
Possession of the Property shall be given thirty (30) days after signing the Purchase Agreement or earlier by mutual agreement. Any extension must be agreed upon in writing by the Buyer and the Seller.
After signing of a binding Purchase Agreement, the Buyer shall hold the right to have the Property inspected by a professional of their choosing.
After the Property Inspection, the Buyer shall have seven (7) working days to report any new disclosures in writing. If the Buyer and Seller cannot reach a mutual agreement within three days of delivery of the disclosures, the Purchase Agreement shall be terminated with any earnest money or deposit being returned to the Buyer.
This Offer Letter shall be considered non-binding. The terms outlined herein are solely for the purposes of facilitating negotiations in the future, to which neither the Buyer and Seller are bound.
Buyer’s signature __________ Date __________
Print Name __________
Real Estate Offer Letter Tip: Make the opener personal
It’s always a good idea to leave emotions out of investment decisions.
That’s not to say that emotions don’t run high during commercial property deals. Often, successful negotiations take place when buyers and sellers cooperate and align expectations. But the negotiation process is long, intensive work, lasting anywhere from a few weeks to months.
As such, there’s no good reason why you shouldn’t share some details about who you are as a real estate investor to help the seller get to know you better. You can include this information in a separate letter attached to your Letter of Intent. Still, it’s a good idea to avoid divulging information that may be deemed too personal.
Your Commercial Real Estate Expert
Rushing into a purchase can leave you stuck in a deal that doesn’t suit your business goals. Negotiations are another tricky aspect of purchasing commercial real estate, and in some cases, prospective buyers may not see the hidden dangers in making certain offers.
If you’re ready to invest in commercial real estate, including hotel and motel real estate, contact Anthony Maccaroni today. Anthony has decades of experience in the Pinellas County Commercial real estate market. If you need assistance diversifying your portfolio, contact Anthony for a free consultation today.