Using Seller's broker suggested LOI format and closing attorney

July 10, 2024

by a searcher from Charles Sturt University in New Jersey, USA

I am interested in putting an LOI for a business but the Seller's broker insists to use their "Offer to purchaser" format for submitting an offer which is very simplistic, requires earnest money deposit and prescribes a use of a particular closing attorney as a transactional attorney, cost of whom to be shared by the Buyer and the Seller equally. This attorney will be also be responsible for drafting up the purchase agreement. They insist that this is the only way they will let the transaction happen. Has anybody else had this situation? How can one negotiate out of earnest deposit and use of broker suggested attorney for closing?

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Reply by a searcher
in Reno, NV, USA

Remember. The seller's broker is working for the seller, not you. Brokers like to work with attorneys that they've worked with and know will not "nit pick" every detail in an LOI or purchase agreement so they may try to "steer" you toward one that they know works well in M&A transactions. You might ask the broker if he has another attorney represent you as neither the broker nor seller's attorney can truly represent both parties equally. Suggest that you pay for your attorney and the seller pays for their own. If the broker and seller balk, be prepared to either pay all closing fees (including attorney's fees) for both parties or walk away. In either case I would always have my own attorney who is ONLY working in my best interest.

Reply by an intermediary
from City University of New York (CUNY) System in Wesley Chapel, FL, USA

Draft your own LOI and ensure all core business issues are outlined and major T&C noted to be included in the definitive documents are stated. DO NOT USE a pre-defined broker LOI UNLESS it has EVERYTHING area you want to be in it covered and you can modify it to your liking (I don't know of many brokers who have a truly complete LOI draft - some do, most don't). Regarding attorneys, the broker can suggest an attorney (not the seller's attorney), but go and interview at least 2-3 others that you find via recommendations from trusted sources.

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