LOI vs Puchase Agreement

[Philip Hernandez]

Hello BP sages. I'm in negotiations to purchase a 12 unit apartment building in Ohio. We've tentatively agreed upon a price, but there's quite a bit of the financials that the owner has not yet provided. I'm hesitant to enter into a purchase agreement, until going over the financials/paperwork of the property in greater detail. I also don't want the broker to feel like I am wasting his time, as this is my first deal of this size. What advice do you guys have with using an LOI to start negotiations, vs purchase agreement?

[Todd Dexheimer]

Our LOI specifies the docs that the seller provides upon execution of the PSA. Our timeline doesn't start until we get the PSA signed and all requested material.

30 day due diligence period to start upon contract execution by both parties and at the time the seller provides the following:

• K-1, Schedule E and all other tax related documents pertaining to the property for past 3 years.
• Certified Rent roll current showing deposits and lease terms
• 3 years trailing of P&L statements
• Copy of all leases.
• 12 months of property specific bank statements, tax statements, and utility statements
• List of any active or pending city violations and requirements.
• Schedule of all improvements made to the property with the current ownership in the past year
• Insurance loss run reports
• Any records in possession by the seller pertaining to the boilers, water heaters, roofs, plumbing, environmental studies, surveys, electrical and parking lot shall be provided within 5 days of opening escrow.
• Contracts for all services rendered
• All materials currently on site shall be included in the sale.
• Lien waivers shall be obtained prior to closing for any permit required work completed within the past 6 months.