What is a preliminary agreement for property sale that binds the seller to a good faith agreement called?

A preliminary agreement for property sale that binds the seller to a good faith agreement is referred to as a Letter of Intent. This document outlines the general terms and conditions of a potential transaction and expresses the intention of the parties to enter into a formal agreement in the future. While it is not typically legally binding in the same way as a purchase agreement, it does indicate a serious commitment from both parties to negotiate in good faith towards a final contract.

This makes a Letter of Intent important in real estate transactions, as it helps to clarify the expectations and intentions of both the buyer and seller before moving forward with more detailed negotiations or documentation. It can serve as a useful tool for negotiating key terms like price, contingencies, and timelines, thereby setting the stage for a successful transaction.

In contrast, a purchase agreement, binder, or contract of sale refers to formal contracts that finalize the terms of a real estate transaction, making them distinct from the preliminary nature of a Letter of Intent.