Purchase Contract vs Letter of Intent.

By
Real Estate Broker/Owner with Fort Lowell Realty

When it comes time to submitting offers there are two different ways you can go about it. You can use a Purchase contact or a Letter of Intent. Main factor in deciding if you should use a purchase contract or letter of intent is the type of property you are investing in. 

 

Purchase Contract

 

Purchase contract’s are most commonly used when buying a single family home. When it comes to buying a property that you are more serious about getting it is best to submit a purchase contract as it has more weight than a letter of intent and so will be more respected by the broker. 

 

It carries more weight because... the seller can sign it right there are you would be in contract. The agent also respects it more because they will think that you probably only sent out 1 offer to them and not 10 others to 10 other properties because you don't want to risk becoming a bankrupt tycoon all of the sudden.

 

Letter of Intent

 

Letter of intent is good to use when you are looking at multiple properties and are trying to get a good deal. Say you have interest in 10 properties you can send out 10 letters of intent. This is good because you do not have to show letters of intent to the Arizona real estate commissioner when you get audited, which is really great because now you only have to take one asprin when you find out it's your turn to be audited. Also if you were to submit 10 purchase contracts and if they all accepted you would be stuck with 10 properties and that could become a huge problem if you can't manage buying 10 properties  but with a letter of intent you wouldn't have to worry about that due to that fact that the letter of intent is not a commitment to buying a property. You can also use a letter of intent as a bargaining tool.  Lets say one party were to agree to the terms you could perhaps begin to barter that with another party.

 

If you would to learn more about investment properties check out our website Fort Lowell Realty & Property Management. 

Comments (2)

Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Especially with more complicated properties, like developable land, or commercial properties, where you can't use a cookie cutter Contract, but have the attorney prepare one. Letter of Intent is great as it sets the major parameters, and then you have time to prepare the contract, knowing that you are not simply wasting your time..

Nov 19, 2015 07:31 AM
Riva Gambash
Addisleigh Park, NY

Letter of intent is used also in SFR over one million dollars .It is a great smart way to start all negotiations.Protect your license and your clients always start with an LOI.If the listing agent does not like it , he/she has all the right in the world to move on to a different buyer.I always think first of all how to protect my clients and my license Not my commission!

Oct 28, 2016 09:50 AM