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Due Diligence - Seven Step Walnut Creek Check List - Part One

By Richard Sorrentino

Services for Real Estate Pros with The Private Placement Group

June 29, 2009 04:15 PM

How to use seven steps to make sure your Letter of Intent process is complete. What if you discovered a simple list that you can use to follow the progress of a completed Letter of Intent? Here is a seven step check list to follow:

Letter of Intent

1. Reviewed and signed off by you

2. Reviewed and signed off by legal

3. DD can expire without obligation by buyer

4. Deposit release requires affirmative written action

5. Sufficient time for due diligence

6. Sufficient Time for Financing

7. Deposit goes hard on:

Step 1: Reviewed and signed off by you: You can easily use this reminder that you have reviewed the letter of intent and approved it. Just sign or check this step and make note of the date. Here is legal reminder to follow.

Step 2. Reviewed and signed off by legal: Use this reminder that you have reviewed the letter of intent and approved it once it returns from your lawyer. Just sign or check this step and make note of the date. Here is the DD time line reminder, next.

Step 3. DD can expire without obligation by buyer: You can easily use this reminder that your due diligence timeline ends without financial consequences to you as the buyer.

Step 4. Deposit release requires affirmative written action: Reminder that your hard money deposit will only be returned by written agreement. Make sure your letter of intent has this clause to protect you if you decide to walk away from the deal. Check this and make sure your lawyer includes this clause.

Step 5:Sufficient time for due diligence: Check the amount of time you asked to complete due diligence. Then check again, allow a sufficient number of days with a built in extension if time lines are not met by the seller.

Step 6. Sufficient Time for Financing: In today's investment market, financing takes longer, negotiate sufficient time, then ask for more than you need.

Step 7. Deposit Goes Hard On: When do you need deposit money on the table? Agree to a date and do not deviate.

You want to issue a letter of intent to get an investment tied up and you agree on the stated terms within the letter. The letter of intent is basically a statement that the seller is looking to sell and that you are looking to buy. The letter allows for an inspection period and a financing period that is called due diligence . But that is not all . . .

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Karen Anne Stone

New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX

Fort Worth Real Estate

Richard: It appears that you took some time to write this post. All organized and such. But... just what IS a letter of intent ? What does it have to do with real estate ? I am sorry... but I have no clue ?

Jun 29, 2009 08:49 PM

Roy Kelley

Retired - Gaithersburg, MD

How frequently would you use a letter of intent in real estate? What are the appropriate circumstances?

Jun 29, 2009 09:35 PM

Richard Sorrentino

The Private Placement Group - Walnut Creek, CA

ATR

You can formally state your intention to purchase a commercial property prior to writing a legal binding contract using a letter of intent (LOI) or memorandum of understanding. The letter of intent is presented to a seller in the very preliminary stages of a commercial investment project. The intentions of a buyer or buyers representative, often the managing partner, are spelled out clearly and simply so the seller knows exactly how the buyer (or syndication) wants to purchase the property, and under what terms.

Jun 30, 2009 01:21 AM

Richard: Ok... so this letter of intent pertains to purchasing commercial real estate. Thanks... the post did not mention that, and I am not familiar enough with commercial real estate to have figured it out myself. Thanks... take care...

Jun 30, 2009 01:56 AM

The letter of intent is an outline of the buyers intention to follow through with the purchase subject to the representation of the facts by the seller as true and correct. The facts are substantiated during the due diligence period following a signed letter of intent. The LOI allows for an understanding between the buyer and the seller to take place, without lengthy and costly legal positioning taking place. All facts and figures about the subject property can be verified so that the buyer understands exactly what he or she is getting in the property. If the buyer finds something that he or she can not accept, during the due diligence process or something not originally expected, he or she can back out without any recourse or punishment.The LOI is commonly (and should be) used when buying any commercial property.

If the letter of intent is accepted, then the due diligence period will begin. It will continue until the time agreed upon by both parties expires, then a binding legal contract is constructed. Terms may change during this time if certain aspects of a property, previously not disclosed, are discovered. For example,the property may be in a lot worse condition than originally thought, causing the buyer to negotiate a decreased purchase price or the buyer will not want to purchase the property and will safely option out of the non-binding contract.

Jun 30, 2009 03:44 AM

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Richard Sorrentino

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