Unlike residential deals where a contract is issued with a purchase price by the buyer and - if the seller signs it - you are in-contract, commercial deals start with a non-binding LOI.

LOI spells out the following terms:

1. Purchase price
2. Amount of earnest money deposit being offered.
3. Buyer's choice of the escrow agent.
4. How the balance of the purchase price will be paid
5. Within what number of days the buyer will execute a purchase contract after all terms are accepted
6. How long the feasibility period is
7. How many times and for how many days the buyer has an option of extending the feasibility period (if any)
8. If there is any additional deposit being offered if the buyer exercises this option if the deposit is refundable
9. Within what number of days the buyer will close after expiration of the feasibility period
10. What the real estate broker commission is and who pays it
11. What documents the seller will have to provide and within how many days
12. How the closing costs are split between the buyer and seller

The LOI is drafted as a document that is sent to the sellers. From there, the sellers would "red-line" the document with changes that he/she wants and the buyers can counter these on the same document with their "red-line." If lawyers are involved, they will also add their own comments and changes to the same document. This can go back and forth a number of times until all terms are agreed on by both parties.

Based on the final version of the LOI, the buyer then submits a draft contract that will contain other legal terms. This too can go back and forth as a red-lined doc. Once this is finalized, we are in contract!