The non-binding outline of proposed loan or transaction terms.
A term sheet or Letter of Intent (LOI) is a typically non-binding document outlining the principal terms of a proposed real estate transaction or loan. Term sheets bridge the gap between conversation and formal contract — they document what the parties have agreed to in principle and serve as the framework for full documentation.
On loan transactions, the term sheet typically outlines: loan amount, interest rate (or rate index + spread for floaters), amortization period, term, origination fee / points, prepayment structure, recourse / non-recourse status, key covenants, conditions precedent to closing, and timeline. The term sheet is non-binding — either party can walk away — but it commits both sides to working in good faith toward closing on those terms.
On purchase transactions, the LOI typically covers: purchase price, earnest money structure, due diligence period and contingencies, closing timeline, broker fee structure, and any special provisions (financing contingency, environmental contingency, etc.). The LOI is the framework for the eventually signed purchase and sale agreement (PSA), which is the binding contract.
Binding vs non-binding provisions matter. Most term sheets and LOIs are predominantly non-binding — neither party is obligated to close. But certain provisions are typically binding even within an otherwise non-binding document: exclusivity / no-shop (seller can't shop the deal to other buyers during diligence), confidentiality, break-up fees in some institutional deals, and governing law.
For investors, the term sheet is the place to get terms right before formal documentation. Once attorneys are drafting full loan docs or PSAs, every issue takes 10× the time to resolve. Negotiating prepay structure, recourse, covenants, and closing conditions at the term sheet stage is far easier than litigating them through the back-end documentation. Good term sheets are detailed; bad term sheets create disputes during documentation.
| Borrower | XYZ Investments LLC |
| Property | 24-unit apartment, Chicago IL |
| Loan amount | $3,500,000 (75% LTC) |
| Rate | Term SOFR + 350 bps |
| Term | 24 months + two 6-month extensions @ 50 bps each |
| Amortization | Interest only |
| Origination | 1.50% |
| Prepayment | Open after month 6 |
| Recourse | Springing recourse — bad-boy carve-outs |
| Conditions | Appraisal, PCA, Phase I, title, insurance, formation docs |
| Closing target | 21 business days |
| Binding provisions | Exclusivity 30 days, confidentiality, break-up fee $25k |
Mostly no — the main commercial terms (price, closing) are typically non-binding. Specific provisions like exclusivity, confidentiality, and break-up fees are often binding. The full transaction documents are the binding contract.
Largely terminology — they cover similar ground. "Term sheet" is more common on financing transactions; "LOI" is more common on purchase transactions. Both outline proposed deal terms in non-binding form (mostly).
Yes — most term sheets are non-binding, and lenders can decline to issue a binding commitment after underwriting. Loan commitments are binding offers; term sheets are not.
A binding commitment by the seller (in a purchase LOI) or borrower (in a loan term sheet) to deal only with the named counterparty for a specified period — typically 30–90 days. Prevents shopping the deal during diligence.
Typically 3–10 business days for routine deals, longer for complex ones. The goal is to resolve fundamental issues before more expensive formal documentation begins.
Matrix issues realistic term sheets backed by underwriting we can deliver — no bait-and-switch on terms during closing.
