Sample Letter of Intent 3

Date:__________
To:____________
From:__________
RE:____________

Mr. __________, we believe we can help you and your family accomplish both of your goals in selling your property on _____________. We would like to propose that you carry the financing on this property. You can then choose to either have part or all of your payments made directly to the Big Brothers Big Sisters in the form of a donation if you wish. And, you can will these payments to them or to your family if you wish as well.

This will allow you the opportunity to receive a great deal more than your original asking price for the property while giving our company the ability to experience a slight positive cashflow after expenses. In addition, carrying financing on this property allows you to pay only ordinary income taxes on the money you receive during each tax year rather than having to pay capital gains taxes on the entire profit from the sale of the property. In addition, if payments were made to your Charitable Remainder Trust, it’s quite possible that the monies could be tax free but you’d need to check with your CPA or Tax Accountant to verify this for sure.

The following sets out the basic terms upon which we would be prepared to purchase the Property. The terms are not comprehensive and we expect that additional terms, including reasonable warranties and representations, will be incorporated in to a formal agreement (the “Agreement”) to be negotiated by both parties. We believe in a win/win way of doing business and are looking for a property that would be a good addition to our portfolio and provide positive cashflow with additional cashflow potential through longer term management.

The terms of our offer are:

Buyer: ________________
Seller: ________________
Property: __________________, free and clear of all liens, charges, and encumbrances at Closing Purchase

Price: $___________

· Seller will carry back ___________(less ________cash down payment) at __% interest amortized over _____ months; Buyer’s payment to seller will be __________per month to include Principle and Interest.
· Total payments to Seller if the loan is held for the full term will be _________. Seller’s loan will be secured by a Deed of Trust against the property.
· Buyer will hold the right to pay the entire balance of the Principle without a pre-payment penalty. However, should both parties agree that financing continue beyond ____ months, Buyer agrees to award Seller an additional one-time payment of ____% of the appreciated value in the property (based upon the difference between the purchase price and the new appraised value at time of refinance or sale of the property to be paid at loan payoff)

Deposit: Upon execution of the Agreement, the Buyer will deposit with Monument Title, the amount of ________, which will be fully refundable if the Conditions Precedent, paragraph 7, are not satisfied or waived in writing by the Buyer. Otherwise, the Deposit will be applied to the Purchase Price at Closing. If the Buyer defaults at Closing, the Deposit will be retained by the Seller as its sole remedy.

Access to Materials: Within fifteen (15) days of execution of the Letter of Intent, the Seller will deliver to the Buyer, copies of all documents pertaining to the Property and within the Seller’s control, including:

· All tenant leases and amendments
· Current rent roll
· Current operating statement and operating statements for the past three (3) calendar years
· Delinquent accounts report
· Security deposits list
· All reports including:
    · Most recent appraisal report (if available)
    · Most recent property inspection report (if available)
    · Most recent environmental inspection report (if available)
· All vendor contracts in relation to the Property

Conditions Precedent: The obligation of the Buyer to purchase the Property will be subject to satisfaction or written waiver by the Buyer of the following conditions (the “Conditions Precedent”) within ninety (90) days after execution and receipt of materials in “Access to Information” paragraph 6.

· Review and approval of the Materials in paragraph 6.
· Completion of satisfactory physical inspection of the Property.
· Completion of satisfactory due diligence searches and examinations.
· Satisfactory review of Title to the Property.
· Approval of all managing members of Buyer.
· Satisfactory review and approval of the zoning for the Property.

Return of Materials: All information provided to the Buyer will be returned to the Seller or destroyed (if requested) if the Agreement is not executed within the time provided.

Environmental & Physical Inspections: Buyer shall have ninety (90) from agreement on this Letter of Intent to complete necessary inspections and obtain approval of such inspection reports from all managing members of Buyer. Seller agrees to repair or replace any structural, operational, or environmental problems found as a result of the inspections prior to Closing unless otherwise negotiated.

Closing: The Closing of Escrow will occur no later than _____ days from the agreement to this Letter of Intent, unless the terms of paragraph 6 or 7 have not been met or a written waiver by the Buyer has been provided to the Seller.

Extension of Closing Date: The Buyer will have the right, on one (1) occasion, to extend the Closing Date through a signed addendum to the Purchase Agreement.

Costs: They Buyer and the Seller agree to split the Closing costs associated with this transaction. Buyer and Seller also agree to split the cost of the appraisal for the property. (appraisal is not required if financing is held by Seller as proposed) Buyer agrees to cover the cost of any required inspections.

Sales Commissions: Since the transaction is a “For Sale By Owner,” and the Buyer is not being represented by a Broker (though one member of the Buyer is a licensed Realtor in the state of Arizona), no sales commissions will be due upon Closing.

Tenant Inducements and Commissions: Any tenant inducement granted by the Seller prior to Closing, including free rent and any improvement allowance, and all leasing costs, including commissions, will be paid the Seller or debited to the Seller at Closing.

New Leases and/or Lease Modifications: Seller agrees not to modify or enact new lease agreements or vendor contracts without express permission from the Buyer once this Letter of Intent has been accepted.

Proration of Income and Expenses: Buyer and Seller agree to pro-rate appropriate income and expenses for the month in which the transaction closes based upon the actual Closing date.

Confidentiality: All negotiations regarding the Property will be confidential and will not be disclosed to anyone other than respective advisors and internal staff of the parties and necessary third parties, such as lenders approached for financing.

Purchase and Sale Agreement: Upon execution of this Letter of Intent, the Buyer will prepare a draft of the formal Agreement for the Seller’s review.

Acquisition of Nominee: If the title of the Property is held in trust for the Seller by a single purpose nominee, the Buyer will be entitled to purchase the shares of such nominee for the sum of $1, and the Seller will convey such shares and the beneficial interest in the Property to the Buyer at Closing, with title in the state contemplated.

Exclusive Opportunity: Following the execution of this Letter of Intent, the Seller will not negotiate or enter into discussions with any other party or offer the Property or any interest herein for sale or long-term lease to any other party until the time herein provided for settlement of the Agreement has expired or negotiations pertaining to the Agreement are terminated on not less than five (5) days written notice to the Buyer.

Not a Binding Agreement: This Letter of Intent (except paragraphs 8, 11, 15, and 20) does not create a binding contract and will not be enforceable. Only the definitive Agreement, duly executed and deliver by the Seller and the Buyer, will be enforceable.

Acceptance: To agree to the foregoing terms, please sign and return a duplicate copy of this Letter of Intent by no later than __________pm, ___________, 20___. Facsimile is acceptable.

Sincerely,

_______________________________________
Authorized Buyer’s Representative Name (Printed)

_______________________________________
Authorized Buyer’s Representative Signature

The above terms are accepted this _______ day of ________________, 20___.

_______________________________________
Authorized Seller’s Representative Name (Printed)

_______________________________________
Authorized Seller’s Representative Signature