How to Write a Letter of Intent to Purchase a House

Before you submit an offer to purchase a house, you can approach a seller with a letter of intent. It usually proposes sale terms, such as price, closing date, inspection plans and financing. Letters of intent don't bind the buyer or seller to negotiate further or make a binding sale contract. Letters of intent are usually associated with complex real estate deals involving investment and multi-family houses.

Identify the seller by name. Include all owners listed in the public record or any business names. For example, if the seller is a limited liability company, a partnership or a corporation, use the seller's business name. Include the house address and any unit numbers if the house has multiple units. Also, sign the letter with your personal or business name and include space for the seller to acknowledge acceptance of your letter of intent. These signatures and acceptance date belong at the end of the letter.

Include deposit and down-payment amounts and loan type. Also state how you plan to pay the seller, such as in full at closing or over time via seller financing. Set deadlines for inspections and seller disclosures you need after you enter into an agreement. List information you expect from the seller, such as homeowners association documents or rental agreements if the house is occupied by tenants. Identify your broker, if using one, along with the broker fee and who pays it. Brokers are typically paid a percentage of the sale price or a flat fee, and either the buyer or seller may pay it. Set the date on which you want to take possession of the home, which may differ from the closing date.

A clause in your letter of intent can help safeguard your negotiations and help you enter into a binding agreement. You can prevent the seller from introducing or dealing with competing buyers during your negotiations through an exclusivity condition. Also known as a "stand still" clause, the condition should define how to solidify your agreement, or enter into a mutually binding contract, and how long the seller must wait before dealing with other buyers. For example, the "stand still" clause may state that the seller can't negotiate with other buyers unless both of you fail to sign a purchase agreement within a certain amount of time, such as three days, of signing your letter of intent.

You aren't obligated to purchase the house without a formal purchase agreement. A letter of intent doesn't bind either side to negotiate or enter into a binding contract, either. The nonbinding terms of a letter of intent provide you the flexibility to walk away from negotiations before entering into a binding agreement. Mention that the letter itself is non-binding. Any terms that you expect the seller to adhere to without a contract, such as a "stand still" clause, should be mentioned as an exception to the non-binding condition.