Making the Offer How to Draft a Letter of Intent To watch the corresponding video, Click Here! So you have now found a property that you like and you want to make an offer. This is where I see so many students and so many of my clients start to fall down. Let s really go through the letter of intent process, It is not hard. Once you start making offers, you'll be doing it on a regular basis, which is what you need to do to be successful in this business, but, you ve got to have the confidence to be able to do it, and it's very easy. How to Write a Multi-Family Letter Of Intent: That Gets Accepted You want to write offers that get accepted. You can write offers all day long, and paper your wall with them, but if they don't get accepted, you're never going to be in this business. So, what do you need to do to write an offer that's going to get accepted? I see many clients of mine that have roadblocks in their mind as to why they can't do this. I just want to identify these myths, and dispel them for you Seven Basic Elements of a Letter Of Intent Whether you draft your letter of intent on the back of an envelope, or on a cocktail napkin, they all need to have these seven elements at the very least. Also, there are things you should never, ever put in a letter of intent. I see these mistakes all the time. I see other real estate gurus out there teaching you to do it this way, and I'm telling all my clients, I'm begging you please, don't do this.
Let s say that youfound a property that you want to make an offer on, and just think, there might be ten other people making an offer on that property. What do we have to do to write your offer in such a way that you move up to the top of the pile? You don't want to be looked at by the broker and instantly discarded. You want them to look at your offer and say, Whoa, okay this one looks good, let's talk to this guy. Let me just stress, and I can't stress this enough, that if you've come this far through the training program, if you desire more than you can imagine that you want to own multi-family property, do not get hung up on the letter of intent process. Do not sit in your room, or your office thinking, I can't submit an offer. Let me just explain to you folks, that if you are not making offers, this is nothing more than a very expensive hobby. You've got to make offers; you've got to be confident in your offers. If you have any problems with making your offer, as long as you've paid me the big money, call me. You're sitting in this training program, you've learned how to do this; we're taking you through the whole entire course, if you have any problems, call me. If even after you sit there and you don't have any idea what to do and you don't want to call me, you're done. If you can't get past this particular part of the process, you're done, but before you even quit, call me. through the whole entire process. I'll take you Four Myths of LOI
1. I Have No Money. You don't need money to make an offer. I know that sounds crazy, but that s the fact. You don't need to have money in order to make an offer. All you're doing is putting a letter out there that says, I would be interested in buying your property at these terms. Would you be interested in selling me this property at those terms? No money is exchanged hands. There is no consideration. Just send the letter. 2. I Haven t Seen The Property Yet. What you might tend to see is, I haven't seen the property yet. Okay, you know what; this is a very legitimate complaint, or legitimate issue that I come across all the time. Let me explain to you what I mean by this. Many times if you submit an offer, you'll hear back from the broker; the seller says, They like your offer, but they're not going to accept it until you come out and have seen the property. If that's the case; that's a very smart seller. They want you to come out and look at the property, get a feel for it, understand how ugly it could be, before they start to go down that primrose path of going through the purchase and sale process with you. So, if your objection, if your myth is, I haven't seen the property yet, okay, I can understand that, but how do we overcome that? A couple of times, whenever I submitted an offer, and I get this objection back from the broker, you know sometimes it's because I was looking at a property in Texas, let s say, and I live in Boston, and the broker says, Well, the guy doesn't want to accept your offer until you had a chance to come out and
look at it. Well, you know, I've got kid s vacation coming up, and I wanted to get you an offer, and not sit on it because I'm not going to be able to get out there until, you know, three weeks from now, but let's start going through the process, explained to him my schedule, and we'll see what happens. And, that's one of the ways we ll be covering that kind of objection, but just understand that if you get this objection from a broker, this is a very valid one, this is a smart, a smart objection. I know that if I was selling any one of my properties, I would want the person who's thinking about buying it, to come down and take a look at it. Come down and look at it, you're going to have to see it anyway, so before we start going down the process, come take a look at it. 3. I Have No Entity. I have no entity. I haven't set myself up as a business yet. I don't even know how I should address the letter of intent. Well, you know, we handle all of that for you. You know that our practice, our firm, and this particular course; we draft all of your entity documents for you. We put them all together so, if you are still sitting there watching this course after a month of being in the program, and we haven't done this for you yet, give us a call and let's get started putting together your entity. If you're not part of the program, you're just watching this right now, let me just tell you that you do not need an entity to draft a letter of intent. You can do it under your own name and always include that particular provision afterwards and/or assign. Whether you have an entity set up or not,
you should always have that particular clause in there because you know, you never end up owning the property in the same entity you made the offer in, because you haven't figured that part all out yet, because the deal is done. So, don't let this be a stumbling block for you. 4. I Haven't Been Pre-Approved Yet. Also, I haven't been pre-approved yet. Well this is a very important one and I, you know, stress very strongly with all of my students that we need to get you pre-approved. We need you to sit down with our mortgage lenders and say okay, this is what you can do and this is what you will need to understand when you make your offer and calculate your numbers. What I mean by that is, if you're looking in Michigan for a particular type of property, your analysis should take into consideration that you're going to have to put down more than 10% for instance, to do a deal in Michigan. Fannie Mae at this time that we're making this video, Fannie Mae looks at Michigan as being a pre-approval state, which means that you have to put down 35% down. So, that means when you go to do your analysis, you should take into consideration, you're going to have to come up with 35% down to make the numbers work, or get the deal approved. So, you know, you haven't been preapproved yet so, I can't make any offers, okay you know what, that's, it's prudent for you to get pre-approved, but it's not necessary. Just get out there and start making these offers. Don't listen to that boogie man who's telling you that you're not ready to start making offers.
Seven Elements of an LOI What are the elements that need to be in every letter of intent whenever you submit an offer? Whether you're using what I call, the short form letter of intent, or, the long form letter of intent, and we ll get more into that in a moment. If you have our course, you ll have that form for you; both of them are templates in the library, you can go download them right now. All letters of intent need to have these following seven elements: 1. Property Name Property name; sounds basic, but, you'd be surprised. Sometimes the owner owns multiple properties. You've got to make sure that you re making the offer on the one that is for sale, the same one that the seller thinks he is selling. He might own property right across the street that he thinks he's accepting the offer on. Make sure you're very clear on the property. 2. Purchase Price Next thing you want to look at is the purchase price. Now understand that the purchase price comes with other elements below it, so let's give you an example. Let's say, in this offer that you're making, that you're going to offer a million dollars. Okay, so you put down on the purchase price a million dollars. a. Earnest Money Now to make this a very substantial offer, you're going to have to distinguish for the seller, how much of that million dollars is going to be earnest money that you're going to put up once you signed the purchase and sale contract.
b. Down Payment You're going to have it down for him, how much money you're putting down on the property. He wants to know how much cash you're bringing to the table. c. Seller Financing You're going to have down any type of seller financing that you're asking the owner to submit; that's got to be all in the letter of intent, and note, that I call it seller financing and not second mortgages, and I'm going to explain why in a moment. d. First Mortgage How much of the first mortgage, and where is that first mortgage coming from? And what do I mean by that? Are you going out to your lender to get a first mortgage, or are you assuming the existing mortgage that's in place? That needs to be spelled out in the letter of intent. That's why we put it in here, first mortgage. New money? Assumption? You tell me. 3. Inspection Period On the next thing that goes into every letter of intent is, the terms for the inspection period. How long are you asking for to look at his property, and complete a due diligence? That needs to be spelled out in the LOI. 4. Financing Period
How long is the financing period? Once you've completed the due diligence period, how much time do you need to sit down with your lender and have them go through the deal and approve it? 5. Closing Date What part is the closing date, after you've completed the financing period? How much time is your bank going to need to close on the deal? I sometimes see people put crazy dates in there like, five days or, sixty days. No, that never works. Typically, at the end of a financing period, the bank is going to need about two weeks to close on the deal. So you ask for fifteen days after that point, and that should generally be enough. If you put it there five days, I'm going to tell you right now folks, you'll never be able to comply with the terms of that deal, because no lender and no lenders law firm, is going to be able to put this thing together in five days after they've given the approval. So, make sure you understand that you're giving yourself enough time in these terms, to be able to comply. 6. Earnest Money Deposit Next thing is the earnest money deposit. Now remember that in the purchase price we said how much the earnest money was for, now what were going to talk about is, when do you need to have that earnest money in the door, after you've executed the purchase and sale agreement, and then, how much money do you need to have and, under what terms are you going to be able to quit and get all your money back, no questions asked. 7. Who Pays For What?
Who pays for what? This is key. I deal with clients all over the country and different parts of the country deal with these expenses differently. a. Broker Who pays for the broker? Get that put out there, right from the very beginning. If you're dealing with a broker and you didn't hire him and he's not a buyer's broker, declare in the letter of intent, that the broker is paid for by the seller. b. Survey The next thing is; who's paying for the survey? You know a survey is going to need to be done. Is it going to be the seller's obligation to pay for the survey, or is it going to be your obligation? You always want to try to move as many of these expenses over to the seller side as possible, but sometimes, that the norms for the geographical area that you're working in, don't allow it, but, you know what, you don't ask, you don't get. c. Closing Costs Closing costs. Who's going to pay for the closing costs? You? Me? The bank? Put it in writing, so everybody knows exactly what's coming down the pike. Money! Money! Money!
Let's talk about money. Money, money, money. This is a very important issue and one that needs to be understood when you're putting together that letter of intent. And, what I mean by this is, at what point, are you going to have to write a check for the earnest money? How Much Do You Need and When? Typically, you should write all of your LOI s, so that there s a 1% earnest money deposit coming out of your pocket. Okay? Now, that is a standard, that's what you see. You may get a counter offer, where the seller wants you to put more money up front. All right? It's his prerogative, if he feels that he wants to see a little bit more skin in the game from you, he may ask for that, but the fact is that, if you come in with a 1% earnest money deposit offer, you've got a solid offer. If you come in with no earnest money, you've got a problem. Now, when do you need this money? This is key. You do not need this money when you submit the LOI. You do not need this money when you have the LOI accepted. In the purchase and sale contract, which is the next step in this process, after the LOI is accepted, and then you start negotiating the purchase and sale contract, when the purchase and sale contract is executed, it typically will say in that contract, that you have X number of days after this execution in order to deposit your earnest money with the title company. So, what does that mean for a calendar standpoint? All right. You submit an LOI today; it goes back and forth between you and the seller. It could take two days to have an LOI accepted; it could take two weeks to have an LOI accepted. Okay, let's say that an average process and it's going to take two weeks. Once the LOI is accepted, then you start moving into the purchase and sale contract phase.
How long does it take for two parties and their lawyers to negotiate a purchase and sale contract? Well, you know what? It could take ten days. I've been involved where it's taken six months to get a deal on a contract. Typically, you re looking at about another thirty days to get that PNS executed. So that means, you're going to go through two weeks of negotiating the LOI, and then another thirty days of negotiating the purchase and sale. So that means, you got about forty-five days from the time you submit an offer, to the time you get a purchase and sale contract executed, before you're going to have to submit any type of money into this deal. So, you've got forty-five days on average. I'll show you how you can manipulate that timeframe, and I mean, manipulate, not necessarily in a bad way, but let me just show you how you'll be able to work this system a little bit to your advantage. Where Do I Get It? Now, the next topic I want to talk about is, where do I get it from? Where do I get the LOI money from? One percent of a million-dollar deal, that s ten thousand dollars. Some of you folks may not have the ten thousand dollars available. Well, this is where; you're out there, looking for investors. Sometimes, you are not only looking for investors to invest in your deal, long term, but sometimes, you re looking for what I call, hard money, earnest money deposit investors. These are people that you can go to and say, Hey listen, I got a deal coming down the pike. I need ten thousand dollars, will do a hard money loan, for ninety days. Can you submit a check to the title company for the earnest
money deposit? That's sometimes where I got some of my earnest money to be able to get into deals right away. That is something that you should be looking for whenever you're out there talking to potential investors on your deal, because what ll happen is, you'll sit down with people who have money and they'll look at your opportunity and they'll say, Yeah I really like this, but I don't want to tie my money up for seven years, and then you look at it and say, Okay, well how about for ninety days? Yeah ninety days, tell me about, more about that. And then, you explain to them how you might need them to provide you with earnest money, in short order; for ninety day periods. It's just like hard money. That's another way that you can use and find other investors for the earnest money. Two Types of Letters Of Intent Next thing is, let's talk about the two different types of the letters of intent. I talk about the short form and I talk about the long form. Now, these are two documents that we have on the template library, you can download them now. The short form LOI, and the long form LOI, have the exact same seven elements that I talked about earlier. Both of them have the elements in each one of them, but the long form has so many more provisions in it, more than the short form. So, what do you use and when? Short Form LOI Here is the short form LOI. As you can see, it's nothing more than just, really, it's two pages. If you see this highlighted section, this is a particular paragraph I'm going to talk about in a moment that you don't need to have in
every LOI. So, if you're looking to just make a lot of offers very quickly, use the short form LOI. Long Form LOI Here's the long form LOI. It's much more in-depth; it's about six or seven pages, and it covers everything. So, when do I use one versus the other? The answer has got nothing to do with what is said in the contract. The answer has everything to do with your strategy for negotiating the deal. Here s what I mean.
If you see an offer, if you see a property that you really like, and you want to make an offer on that property, but you don't have the earnest money lined up yet, submit the long form LOI I'm sorry, submit the short form LOI, because it's going to take you about that seven to ten days, seven to fourteen days, to negotiate the deal, and then, it's going to take you another thirty to forty days, to negotiate the purchase and sale contract. So, that's going to buy you a lot of time in order to get out there and find your earnest money. Now, where you want this deal, you re in competition, and you want to get this deal moving, and you have the earnest money in place. You don't have to worry about writing a $50,000 check for a five million dollar property. Then use the long form LOI, because what the difference is, is that in
the long form letter of intent, all of the terms that are going to have to be negotiated in the purchase and sale contract, are in here. So, once you and the seller agree on this letter of intent, drafting the purchase and sale contract is going to be easy. It's going to take your lawyers a week to do, and that means that it's going to take about three weeks in total, to go from making your offer, to getting it under contract. If you can perform that quickly, and you've got the money in the bank to do it, use the long form LOI. Why pussyfoot around? Get this deal under contract as quickly as you can. Short Form LOI If you don't have the money and you need more time, then definitely submit the short form LOI. One other point is, also is, that, if you are making a lot of offers, if you're making two offers a week, if you're making, you know, and offer a week, and you're just cranking out the offers because you're so anxious to get your first deal done, or a deal done, just use the short form LOI. It's a lot easier to just get it out there and get moving on it. So, the difference between the two LOI, are both in the library, and I recommend you download them. If you have any questions about any aspect of them, please, shoot us an e-mail or give me a call, and I'll walk you through it. How to Craft a Successful LOI Now here's the key, how do you craft a successful letter of intent? How are you going to put together a deal such that, if you're in competition with other investors, you get the deal, all the offers are laid out on the broker s table, and yours is the cream that rises to the top. What does your LOI need to have?
At Least 1% Earnest Money First one is; it's got to have a strong earnest money deposit provision. Don't think that you're going to walk into a deal, and put no money down, and no earnest money, or nothing to bind the contract. They're going to look at your offer and throw it out. At the bare minimum, you should have at least a 1% earnest money deposit in your contract, and you should have someone behind the scenes. If you don't have the money, have an investor behind the scenes who will provide you that money on a short-term basis. It should typically be about 1% and if you're in a really competitive situation, you might want to put down more, or you might want to bifurcate the earnest money. What I mean by that is, you'll put 2% down but, 1% during the first thirty days, during the property inspection period, and then you'll put another percent down after you get beyond that stage, because it looks like you're going to buy this property. So then you're into the deal for 2% but, you ve separated it up over time. No Money Down? Down Payment Next thing is, how much of a down payment are you looking to put down on this property? If you show up to the table with no money down and no earnest money, I'll tell you right now folks, your offer is not going to get looked at favorably. You're going to get laughed at out of the table. Write the offer in such a way that if you were the guy selling the property, you would want to accept your offer. You're going to have to put some money down. Now, whether it's seller financing or whether it's, it's you re showing up to the table with some cash, craft that, figure out what's going to work, talk to the broker before you make the
offer and ask if the seller is willing to get creative with the financing. Find out what he'll accept but, just don't show up at the table; first blush, no money down, you re going to Time Frames for Performing Now, the other thing is the time frames for performing. This is one of the biggest surprises I get in my practice. I get people calling me up saying, Hey, you know, I got an offer accepted, but I'm having some trouble with it. Can you take a look at it? And then, I look at it and like, Who drafted, who wrote these terms? There's no way that you can comply with these terms. example. Let me give you an I had a client that could show up with a ninety day property inspection period, but he had to have his application for the mortgage submitted within fifteen days, and there was no, teeth in the contract that required the seller to turn over the due diligence information at any time. So, that means that, he could get into the deal today, the seller could do absolutely nothing, not turn over one stitch, one rent roll, one bank statement, turn over nothing, and then sixteen days later, my client is now in breach of the agreement, because he did not submit an application. They didn't submit an application because he hasn't even looked at the; had the opportunity to look at the due diligence information. So, if that's the case, how can he even comply with these terms? So make sure that when you're drafting the purchase and sale contract, drafting the LOI, it's in a format and a framework that you can live by, that makes sense between you and all of your team.
Money Going Hard - Never? All of your lenders, all of your inspection team, and, you're going to have everything you need to go through the entire process very smoothly. Never. When is your money going to go hard? Never?!? Really?? You're going to put up, you know, 1% earnest money, but you can't get it back at any time in the future? The seller s going to look at you as being like, Okay. Great, you've got 1% of the purchase price that doesn't do me any good, and now, I've just tied up my property for ninety days trying to sell it to you, and, you're not even going to, you technically have no skin in the game. Now granted, money can go hard, you can get out of deals if you wait a thirty day inspection period, you can get out of that deal in thirty days, get all your money back. You can put another thirty day financing period on top of that, and you can get all your money back after sixty days, but at some point, you are going to have to commit to this deal, and its typically unconditionally for the first thirty, conditionally for the next thirty, and then after sixty days, you're going to own that property, or you're going to lose your 1%. So, make sure you draft your letter of intent, so that it shows up looking just like that. Problems I Have Seen Let me talk about some of the problems I've seen in some of the deals that I've worked on for clients. Impossible Time Frames You know, first one, is we just mentioned, impossible time frames. You just cannot comply. You've got to make sure that you craft an LOI that
you are going to be able to live up to. So just think about it. Think about everything we talked about in this course; all the different time frames you need to jump through. Things you need to accomplish in order to get yourself to that closing table and successfully buy that property. If you ve drafted your LOI at the very beginning in such a way that it's impossible for you to ever get there, you re dead. If you don't know what I mean, send me the e-mail, give me a call. I will walk through the process; we ll take a look at a couple of offers that you might be thinking of submitting. No Money Another thing that drives me crazy is, there is, no money. Clients will actually show up, and make offers; no money. Nothing. No down payment, no earnest money deposit, and the seller has to provide 100% financing. Okay, put yourself in the seller's shoes. You're in competition with ten other people. We ll say for example, put yourself in the seller's shoes, think about all the offers that he has to look at, and along comes yours. No earnest money, no down payment, and the seller has to finance everything. Your offer will go at the bottom of the pile. If this guy gets rejected by every other buyer, and then once he accepts an offer, he gets rejected by every single bank, then he's going to come back to you and say, Okay, you know what, you want my problem, you can have it, because I can't sell this thing. That's, you know you might be thinking to yourself, Oh okay, that's fine, I'll take on his problem.
No, you really don t want to do that. If the numbers don t work, don t buy the deal. And, if you show up at the table with a, with an offer that has no money down, no skin in the game, don't expect the guy to really sit up and take a whole lot of notice of your deal. Unprofessional Looking Letter Another thing that has to do Oh, folks, this gets me every single time; unprofessional looking letter. We talked about this in the first month. You re building a real estate, management, investment, business; look the part. You're asking people to provide you with millions of dollars to buy multifamily property. Spend a little money on your letterhead, your logo, your stationery. Don't just submit a deal that looks terrible. Just from a visionary standpoint, I do this for my clients all the time, where we put together the yellow lines for you, together the person's sale contracts, but we'll do it in such a way, that it really makes you look good, as you go out the door. That's really what's going to; another thing that's going to help your offer rise to the top of those ten other competitors. So, make sure you look good. What to Always Put In Your Letter Of Intent When Assuming a Mortgage Finally, oh, not finally, but, something else I want to talk about before we get into those things not to put into your LOI. If you're assuming a mortgage, do not submit a standard letter of intent without this particular wording in there. Download this template, you'll see this
wording in there, this wording only needs to be in an offer that is, you're assuming the existing note; make sure it's in there. It protects you; it protects your investors and allows you to get out of the deal, if the bank starts to muck around with the terms. If the bank starts to muck around with the terms, you want out, and this is how you do it; you've got to have this wording in your LOI, right from the beginning, if you're doing an assumption. If you're not doing an assumption, disregard everything I just said, but go online, or go into our template library, and download the standard short form LOI; I've kept this wording in there. If you're making an offer on a deal, that's not an assumption, make sure that you take this wording out. If you have any questions just give us a call, that's what we're here for. What to (almost) NEVER put In an LOI What to (almost) never put in a letter of intent. I see this so often that some of this stuff drives me crazy. It means that you don't understand what could possibly go wrong in a deal, and my number one rule, in any deal; you'll hear this when you come to my classes, you'll hear it, me saying it, over and over again. Never, ever, ever lose control of the deal. You must remain in control at all times. If you do some of these things, that I see on a regular basis, then there s a possibility that you could lose control over the deal at some point down the road, and you then become at the whim of the seller. You'd never want to be in that situation. What do I mean? Two things. Second Mortgage & Repair Allowances
Do not put in the letter of intent, that you want, a second mortgage from the seller. Now note what I did not say by that. I did not say, don't ask for seller financing. What I did say is, don't make seller financing look like a second mortgage, or say that you're looking for a second mortgage, and here's why. And you don't find this out until you re too far down the path. There is, as I write this, as I record this video, I know of absolutely no lender that will allow a second mortgage, behind their first, on a multifamily property. Fannie Mae will not allow a second mortgage on a property. So that means, that if you're going for a Fannie Mae deal, and we re going to talk more about different types of financing, I believe next month is the course on, debt financing. When we talk about, if you put in the offer, a second mortgage, there is no lender that will allow that to occur. So what happens? You get an offer accepted by the seller that he's going to take back 5%, seller's second. You say, Okay, great. We go through the due diligence process, you go through the application process, with the bank, you pay more money down, you're now in the underwriting process; sixty days into the process, the bank comes back and says, Hey, your purchase and sale contract says that you're going to take seller second at 5%; no, we don't allow that. You're like, Well, wait a minute, I've had this deal out there for sixty days now, my money is hard. Now you're telling me that you can't do a 5% seller second? How am I going to go back and renegotiate that now? The bank is going to tell you that they don't care. Ahh, we don't care. So now you have to go back to the seller and say, Hey, you know that second mortgage, we're not going to be able to do it. Can we renegotiate? He's going
to look at you and say, like, What, are you crazy, what's in it for me? You've just lost control of the deal. That's what you don't want to have happen. So what you say is, The seller s going to take back some paper, and he's going to come back and say, Well, how is that paper going to be secured? And you're going to say, Oh, I don't know, we'll figure that out as we go along. Well, wait a minute, I want a second mortgage. And you say, Well, I can't help you there, no lender will allow that to happen, but if you're willing to provide some type of seller financing, I think we can get this deal done. And then he'll say, Well, give me some examples. And then you come to me and we structure the, LLC, we structure the personal note that s not personally guaranteed, and we go through that process separately, but, it never screws up your deal. You always remain in control of the deal. That's why you should never say on a letter of intent that we want seller financing in the form of a second mortgage. Do not do it. Repair Allowances And the next thing(s) are repair allowances. I see this all the time. I know who it is that s out there teaching this, and I'm here to tell you, stop doing it. If you have never seen a property before, if you're submitting offers on properties that you've never seen, and you go out there and you ask for the standard 3% repair allowance, the guy is going to look at you and say, like, You ve never seen my property, but you're already telling me that you want 3% knocked off the price for repair allowance?
I have no deferred maintenance and your credibility just got destroyed because, you're asking for something that you, that I'm never going to pay you, and no matter how many times these people submit offers, there's always that 3% of repair allowance built into the beginning, and here's the problem. Once you go out there and you ask for 3%, you can never ask for anything more. So you end up going out there doing a physical inspection of the property, and you find out, Holy cow, this property has got some huge problems; the parking lot looks like crap, all the roofs need to be fixed, the plumbing has been caving in, and the pipes have been breaking; I need more. So you go back to the seller and say, Hey, you know I'm going to need you to knock the price down a little bit and give me the 3% repair allowance. And the guys going to say, Hey, tough luck. You didn't know the parking lot was broken? You didn't know the roofs looked the way they did? You're the one that asked for the 3% repair allowance, and obviously I wasn't hiding anything, so that s it. That's the best you're going to get; take it or leave it. So do not put a repair allowance in the LOI, save it for later. You're going to use that as a negotiating ploy, bargaining chip later on when you go to hammer out the physical inspection report. So, those are a couple of the things that I always see in LOI s that you should almost never. Number One Rule: Never Lose Control of the Deal The number one rule, I cannot stress this enough, never lose control of the deal, that's what we always work with our clients. If you get yourself into a deal, and you feel like you're losing control of it, get out. It will never get any better; just get out.