LOI Deadline Ghost Stories

August 28, 2024

by a searcher from University of Miami in Dallas, TX, USA

Has anyone had a firm deadline in their LOI that the seller's representatives ignored and didn't even acknowledge?

I'd appreciate hearing how others have handled this lack of communication.

I believe that even without a yes/no response by the deadline, it's important to acknowledge it and request an extension.

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Reply by a searcher
from Ludwig in München, Deutschland

The question doesn’t contain enough background information to make a valid assessment. Some questions I have are: Why are you asking here instead of asking the seller directly? Were you asked to submit an LOI? Did the seller provide a timeline for the next steps from his point of view? Did you build a personal relationship with the seller before submitting the LOI? Why did you include a tight deadline in the LOI that, from what I gather, wasn’t agreed upon with the seller? Why is this deadline it so important for you to give the seller the impression that you don’t know the usual processing times (in my experience, it has already taken months from the first non-binding offer to a signed LOI, since the seller spoke to a dozen other potential buyers first) or that you’re not interested in their interests? What did the LOI say regarding multiples, exclusivity, deadlines, etc. /was it a good offer? If you haven’t received any response after asking twice, either the seller is unprofessional, or at the very least, your offer doesn’t stand a chance, and you should forget about the deal. Or, especially if this happens to you often, you might be communicating unprofessionally or have a mistaken idea of what constitutes a good offer or process from the seller's perspective. As a general rule, I first submit an indicative offer, and if the seller wants to commit to negotiations exclusively (after we personally met), we negotiate an LOI over several rounds, including lawyers, tax advisors, etc., which then grants me exclusivity. The key point is that there should first be a personal connection and a mutual verbal understanding, which is then precisely documented in writing. It could be (especially if you didn’t align on key points of the LOI, such as the deadline) that what you actually submitted was an informal and, above all, uncoordinated offer (that you just called an LOI) and you did not build up a personal connection.

Reply by an investor
from Indiana University at Bloomington in Austin, TX, USA

Question for you, Paul. If the seller ignores the deadline or doesn't provide a response within the requested time frame, are you willing to walk away? If you're not, then why put a deadline in there at all?

If the deadline hasn't expired, I'd suggest reaching out to the seller or broker and reminding them that there is a deadline on your offer, you expect a response, and if you don't get one, xyz will happen.

As a rule of thumb I never present an LOI to a representative, until I have first had a chance to present it directly to the seller.

In the LOI presentation, I tell the seller at least twice that the offer expires in 5-7 days. Within that time frame I expect a response that either says:

1. Yes we're excited to move forward.

2. No, this isn't a fit

3. A counter offer which lays out which pieces don't work for them and why.

I then tell them that if they don't provide one of the above 3 responses or they don't follow up by the deadline, they can consider my offer withdrawn. The lack of a response tells me they don't respect me, my time, my offer, or the seller can't make a decision.

Another approach is to say that for each hour past your deadline you'll lower some portion of the offer by x. Friend of mine does $100k for every hour past the deadline.

Good luck!

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