The purpose of a letter of intent is so, early on, you and the seller agree on the major terms of the deal.  A well-drafted letter of intent moves a transaction toward a legally binding contract by reducing misunderstandings between the parties and binding them to the deal.

Letters of intent can be used to determine if property not currently listed for sale is available and whether a particular price range is generally acceptable to a seller. They also make it possible for attorneys representing the parties to quickly and efficiently negotiate and draft formal, legally binding documentation by providing a written outline of the deal and detailed information about the parties involved.

Keep in mind that a poorly written letter of intent can actually delay a transaction or cause the parties to waste time on a transaction that has little chance of closing.

A well-drafted letter of intent should include the following elements:

- Title: The letter of intent should be titled "nonbinding letter of intent" or "letter of intent." void "letter of understanding" or "letter of agreement." Other titles that are sometimes used are "term sheet" or "transaction outline."

-  Nonbinding character: The letter of intent should include a provision stating specifically that the document is not legally binding, preferably in capitalized, underlined or bold text. This provision should be located immediately above the signature lines. Ambiguous language such as "subject to legal documentation" or "subject to attorney approval" should not be used as they may result in a binding agreement.

- Separation of binding and nonbinding provisions: Any legally binding provision included in a nonbinding letter of intent, such as an agreement to take the property off the market, should be placed in a separate section of the document to make it clear that it is an independent, legally binding obligation. Courts evaluate the intent of the parties when determining whether a provision is legally binding, so clarity is crucial.

- "No shop" provisions: The seller or landlord might agree not to seek other buyers or tenants for the designated property while the parties negotiate a binding contract. This provision should be in effect for the same term as was set for negotiating in good faith (if applicable). A provision to remove the property from the market or to prohibit specific types of marketing might be included.

The letter of intent may state:
- Whose attorney will draft the legal documentation.
- When the first draft will be completed.
- To whom it will be distributed.
- The form of the contract or lease to be used (TREC or TAR, for example).
- The goal or deadline for completion of negotiations or signing of the binding document.

A list of parties involved in the transaction and relevant information about the parties may be included in the final letter of intent. This information would include company names, individual contacts, mail and street addresses, phone numbers, fax numbers and e-mail addresses.