Advantages and disadvantages of a letter of intent

What is a letter of intent to purchase? When is it advisable to fill it in and when is it considered almost unnecessary? Does this extra security on top of the deposit and the deposit make sense? Which party's interests are you protecting? Among other things, I answer these questions in the article.

Overview: the process of buying and selling real estate, the purchase contract

Let's start with the process of buying and selling real estate, so that it is clear at which point the purchase offer is connected to the purchase.

• The idea of selling is formulated in the seller.
• The seller can sell his property in two ways: he tries to sell it himself or he turns to a real estate agency or an expert.
• The apartment is advertised on various channels.
• Buyers come forward to view the property.
• One of the buyers will be a runner: he really wants to buy your property.
• The parties first agree orally.
• After that, in a few days (possibly a week or two), the lawyers prepare the sales contract, which includes the amount of the advance and the deposit.
• The parties sign the contract, which is countersigned by the lawyer.
• The transfer of the purchase price takes place according to the schedule specified in the sales contract.

A purchase offer is necessary so that there is no period when the parties can only refer to the verbal agreement.

After all, it can also happen that the buyer views the property, even if he likes the apartment, and the seller, seeing the serious intention, cancels the meeting arranged with other interested parties and cancels the property advertisement. Then the potential buyer decides on another property.

Of course, the opposite case can also occur, when the seller, although he verbally agreed with the property inspector, ultimately does not want to sell the property to him, because he received a better offer in the meantime.

However, the goal in every sale and purchase is to ensure that such cases do not occur, but that the process of selling a home is smooth and conflict-free.

Letter of intent pre-contract: when is it used?

Signing an accepted statement of intent to purchase, which legally qualifies as a pre-contract, is a conscious step, but it is not widespread enough - those who sell their property themselves almost never sign a statement of intent, even though it might be worth it.

Most of the time, such a pre-contract is drawn up when a real estate expert or a real estate office is also part of the deal as an intermediary. In this case, the real estate expert is commissioned by the seller to perform the following tasks:

• determining the value of real estate,
• advertising,
• search for potential customers,
• property presentation,
• obtaining the documents necessary for the sale (e.g. founding deed, SZMSZ, etc.),
• representing the owner's interests, e.g.: price negotiation,
• handling the paperwork and administrations associated with the sale.

In all cases, the parties will place the purchase offer at the real estate office for safekeeping. In the mentioned document, the buyer makes a purchase offer for the purchase of the property, which also creates a binding offer. By signing the declaration, the seller accepts the mentioned offer. The amount in the document is considered a deposit in all cases.

In addition, it should not be forgotten that if the declaration is signed by both parties, then the Civil Code. pursuant to which a sales contract is created between the offeror and the acceptor of the offer. In practice, this means that a meaningful agreement is reached between the parties and ensures that the parties "withdraw from the market", i.e. do not agree with others.

However, the amount in the document becomes a lien in the legal sense if the buyer hands it over to the seller and, in case of failure, the injured party (or parties) is compensated from that amount.

But what does a letter of intent contain?

Sample content of a letter of intent to purchase: what should it include?

Since the acceptance of the letter of intent creates a sales contract, it is important that the letter of intent to purchase contains the main commercially relevant aspects that a sales contract must also contain.

Content elements:

• personal data of the parties (such as birth name, place, date, mother's name, serial number of various documents and contact details),
• the data of the subject of the declaration, in this case the property (address and topographical number, area size, and information found on the property sheet: registered rights, encumbrances),
• the duration of the purchase offer,
• payment deadline, conditions and possession: method and deadline for payment of the full purchase price, conditions and date of possession,
• declaration of recognition of the integrity of the apartment.

Pursuant to the amendment of the Housing Act that will enter into force on January 1, 2021, the real estate agent may not edit a sales contract, therefore the documents must always be prepared by a lawyer or a notary public, and the real estate seller may only supplement it with data. However, you may not change the content of the document under any circumstances.

Withdrawal from a declaration of intent to purchase

The amount specified in the purchase offer actually corresponds to a kind of deposit (if it is given as such!), with the difference that it is not included in the sales contract. Canceling the declaration of intent to buy can therefore be costly, and the process can take a long time.

Anyone who withdraws from the declaration of intent to purchase also loses the deposit amount specified in it - and if we withdraw as a seller, then we have to repay the said amount. However, as I wrote above, the amount and the share of the injured parties is arbitrary, it is determined jointly by the parties before creating the declaration.

Purchase offer - the most important

The benefits of a Letter of Intent include:

• can immediately provide security for the parties,
• in case of acceptance, the real estate purchase contract will be created, so you can speed up the process,
• indemnifies the parties,
• the seller will only negotiate with serious buyers, thus saving a lot of time.

Do you have any question? Feel free to contact me for any matter related to the purchase agreement or other real estate matters. Search my contacts!