Signed Electronically Letter of Intent Made Easy

E sign letter of intent

this is how you do a letter of intent on real estate investments that will win you more deals let's go [Music] the letter of intent is simply a non-binding agreement between a buyer and a seller on a real estate deal where you basically just spell out all the major terms of an agreement before having to get attorneys involved and drop a big purchase and sale agreement now in this video we're going to go over all of the major terms that should be in a letter of intent that if you can get agreement on these terms there's a very high likelihood that you'll get to a signed purchase and sale agreement which is the buying agreement that you're looking for anytime you're turning in an offer whether you're the only person offering or you're competing against others the whole goal is to win over the seller to win over the seller there are three things that this letter of intent is trying to accomplish besides obviously turning in good price and terms one you want the letter of intent to be short and concise two you want to convey that you're someone who's going to be easy to work with and three you want to convey that you're someone who's willing able and capable to close on this deal as it relates to number three i highly encourage you to watch this video right here which gives all the great tips and tricks of the most elite investors in the world and how they get their letter of intents accepted every time ideally you want to try to get your letter of intent to fit on one page and no more than two pages the more terms from a purchase contract that you use in a letter of intent the more on alert the seller's going to be from the very beginning and now we're going to begin the content and structure of this letter of intent which by the way in the link in the description down below i give a copy of this letter of intent that you can use for yourself the first item is the reference line where you're going to reference the name and address of the property that you're after and of course you're going to be abundantly clear this is a non-binding contract next you're going to point out who's going to draw up the purchase contract once the letter of intent has been agreed to typically it's the purchaser who of course does the letter of intent and typically does the purchase contract on occasion however you may find that if the seller is a very large organization that does transactions all over the country sometimes they prefer to use their own template contract even though you submitted the letter of intent and i would just go along with that because they're probably much bigger than you are and so therefore you want to play in their ball field next up you're going to say who the purchaser is now if you already have an entity form that you know you're going to buy this with you're going to use that entity if you don't know what the entity is that you're going to use or you're going to create one during the period as long as you put aura signs to a related entity with the same principle that tells the seller hey there's no funny business here i'm going to be the one who's going to buy it if i go to a different company or create a new company i'm still the guy who's going to be on it and so you just want to point that out so they don't feel like you're going to flip this property to someone else later then you're going to list who the seller is and you can find the actual entity name either on the county assessors site or you can check the deed in the public records next up is the purchase price which is probably the most important part and there's really no jazz to this you're just putting down a number next up is how you intend to pay for the asset there's typically cash financing contingency or not conditioned on financing let me explain conditioned on financing means obviously you intend to get financing and if you can't get approved then you can't buy the property not conditioned on financing probably means you're gonna get financing but you're so confident that you're gonna be able to get approved probably because you have long relationships with a lending institution and vice versa and they believe in you that you're not going to make the asset conditioned on financing in order to be more attractive to the seller and the last one is cash which should mean that persons actually paying cash and getting no debt but most of the time in multi-family investments what that typically means is that they're probably getting financing they're just not going to make it conditioned on financing to the seller it doesn't matter it's really cash to them all the seller really cares about is that the whole deal's not conditioned on financing is the ideal thing they want to see now i'm not telling you to pay cash or make something not contingent on financing if you're not prepared for that i'm just telling you in a perfect world especially when you're competing with others if that's possible that's what sellers really look for next up you're specifying the deposit structure typically there's an initial deposit which is put in right after the purchase and sale agreement is executed then there's a second deposit which is after the inspection period expires and at that time the initial deposit and the second deposit are now combined and they're non-refundable that means you're heading to closing typically each of those deposits are put in the escrow account within one to three days after that specific period is due the elite investors that i've watched transact typically use deposits as a differentiator among the competition let me tell you what i mean they know that sellers want to feel like you have enough skin in the game i.e deposit money that you're not gonna walk away elite investors know if they're gonna move past due diligence to closing they're already gonna have to come up with 25 to 35 down to close on the deal so on the letter of intent they want to put down enough money so that the seller knows that they ain't walking away based on that size of a deal now next up is the inspection period but before we jump into that make sure you listen to this video which is the 12 response times that elite investors use to win more deals several things i want to point out in the inspection period paragraph number one of course you're putting the number of days but i highly encourage you to put calendar days when i see business days in anything in a letter of intent it kind of gives that feeling of trying to cheat the system a little bit and it just puts the seller on alert so if you want to be most competitive i would use calendar days and everything you do you're of course going to point out all the different tests and surveys that you're going to do on the property but you're also going to point out that if you don't like what you see in your sole discretion that you want to have an immediate refund of your deposit now the reason you want to use soul discretion words is that you want to point out that you have full control over the decision on whether or not you more forward then i see elite investors point out all the different due diligence documents that they're going to ask for in the purchase contract and that does two things one it gives the seller a chance to review some of those documents and tell you whether or not they have them so that you're going into the deal with eyes wide open and two it gives the seller a heads up of what you're looking for so they can begin assembling documents right now so that when a purchase and sale agreement is executed day one you've got everything you need the items i have listed the ones that i deem to be the most ideal to have day one when you start due diligence if the seller doesn't have them all that's not the end of the world it just depends on which ones they don't have typically a rent roll and at least one year of a p l is the minimum to move forward next up is the closing period which is quoted as the number of days after the inspection period on occasion i will see investors put in an extension clause which basically allows them a one-time opportunity sometimes two times to extend the closing by a certain number of days for that right to extend they will put down an additional amount of deposits that also becomes non-refundable with the other deposits now that extra deposit amount typically goes towards the purchase price but on occasion sometimes if investors want to be more competitive they'll put it as a fee which means it goes on top of the price for that right to extend next up is the commission clause which is the most important clause in the entire document just kidding it's simply pointing out who the broker is and which party is paying them the majority of the time in investment sales there's usually just a listing broker which is typically paid by the seller if there were also a buyer's broker involved or only a buyer's broker involved maybe it was an off-market transaction and the broker brought you directly to the seller then you'll need to specify whether it's the buyer or the seller paying that broker if there's a buyer's broker involved i always encourage the buyer to pay that buying agent because that makes you as the buyer look more attractive to the seller and the seller's agent the reason is twofold sometimes the seller's commission agreement may specify a higher fee they have to pay if there's two brokers involved and a smaller fee if his listing agent is the only one involved secondly if the seller's agent doesn't have to share their fee with the buyer's agent they're going to be more of an advocate for you as the buyer then there is typically a miscellaneous paragraph at the bottom which basically specifies that the parties are going to work hard to go from a signed letter of intent to a signed purchase agreement in a certain amount of time i would put in a little blurb to the seller that says that they won't negotiate with other parties during that period between letter of intent and contract this is a non-binding agreement unless you specify otherwise for that specific clause so they could still talk to other buyers but it's a very small world in the investment world and most sellers don't want to put their reputation on the line like that to bug you out by talking to others and lastly you're just putting a date line in the buyer and seller for signatures from that period once it's fully executed that document is going to go to your attorney to draw the purchase and sale agreement there are any other unique things that need to be entered into the letter of intent like seller is providing financing or maybe you're doing a loan assumption those should be entered in too but for the most part you're just trying to make the letter of intent as easy and attractive to the seller to choose you as possible i hope the video was useful to you and if you could think of any other things that you put on a letter of intent that were ultra successful in getting you the deal please let me know and comment below see you on the next one [Music]