The CRE Acquisition Process: From LOI to Closing

Definition

The CRE acquisition process is the sequence of steps, sourcing, underwriting, LOI, and PSA, followed by concurrent due diligence, lender underwriting, title work, and insurance procurement, and finally closing, that a commercial real estate deal moves through from first offer to closing.

Every concept in this series comes together in a real deal following roughly the same sequence. Here's how a commercial real estate acquisition typically moves from first offer to closing.

Key Takeaways

The typical sequence runs: sourcing, underwriting, LOI, and PSA, but once the PSA is signed, due diligence, lender underwriting, title work, and insurance procurement all happen concurrently, not one after another, before closing.
An LOI is a non-binding offer, a PSA is the binding contract that actually commits both parties.
Escrow, a neutral third party holding funds until conditions are met, protects both sides throughout the process.
From LOI to closing typically takes 60 to 90 days, though financing and due diligence complexity can extend that.

The Process, Step by Step

The steps below happen roughly in this order, but once the Purchase and Sale Agreement is signed, several of them, due diligence, lender underwriting, title work, and insurance procurement, run at the same time rather than one after another. Treat the numbering as the order things start, not a strict sequence where each step waits for the last one to finish.

Sourcing the Deal

Deals are found through broker listings, off-market outreach, or direct relationships with owners. This is where a prospective buyer first identifies a property to pursue.

Initial Underwriting

Before making an offer, a buyer builds a preliminary financial model, using the concepts from earlier in this series: NOI, cap rate, financing assumptions, and target return metrics, to form a view on what the property is actually worth. That model is only as fast as the documents feeding it, and the rent roll and T12 a broker sends rarely arrive in a format you can drop straight in. DealDuo cleans both into Excel before you start building.

Letter of Intent (LOI)

A non-binding offer outlining proposed price and key terms. An LOI signals serious interest and gets both sides aligned on the broad strokes before either party invests in drafting a full contract.

Purchase and Sale Agreement (PSA)

Once terms are agreed, the PSA is the binding contract that actually commits both parties. At this stage, the buyer typically wires an earnest money deposit, a negotiated percentage of the purchase price rather than a fixed number, into escrow, a neutral third party (typically a title company) that holds funds and documents until every condition of the deal has been satisfied. Neither party gets paid or receives title until both sides have met their obligations. Signing the PSA is also what kicks off the parallel workstreams covered in the next step.

Due Diligence, Financing, Title, and Insurance (Concurrent)

Once the PSA is signed, several workstreams run at the same time rather than one after another. The buyer verifies everything assumed during underwriting (financial, physical, legal, and environmental), covered in depth in the previous chapter. If the deal involves debt, the lender conducts its own parallel underwriting during this same window, including ordering an independent appraisal, if that appraisal comes in below the agreed purchase price, it can force a renegotiation or a change in financing terms. At the same time, a title company works through title review and clears any liens or encumbrances, and the buyer arranges property insurance ahead of closing. These workstreams inform each other, a due diligence finding can affect financing terms, and a title issue can affect the closing timeline, so they're best thought of as running together, not as separate boxes to check off in order.

Closing

Once every condition is satisfied, funds are transferred, the deed is recorded, and ownership officially changes hands.

How Long This Typically Takes

From LOI to closing, a typical commercial deal takes roughly 60 to 90 days, though this varies considerably. All-cash deals tend to close faster, while deals involving complex financing, extensive due diligence findings, or title issues can extend well beyond that range.

Why Deals Fall Apart

Not every deal that reaches a signed PSA makes it to closing, and that's a normal risk of the process, not necessarily a sign something was done wrong. Common reasons include financing falling through, due diligence uncovering something material that can't be resolved, an appraisal coming in too low to support the agreed price, an unresolved title issue, or the two sides simply being unable to agree on how to handle an issue that surfaces along the way.

Common Mistakes

Underestimating how long the process takes, and planning finances or other commitments around an overly optimistic closing date.
Treating the LOI as if it were binding. An LOI signals intent, but it's the PSA that actually commits both parties, until that's signed, either side can generally walk away.
Not lining up financing early enough. Waiting until after the PSA is signed to seriously engage with lenders can leave a buyer scrambling to meet the pace the deal actually requires.
Assuming these steps happen strictly one after another. Due diligence, lender underwriting, title work, and insurance procurement typically run concurrently once the PSA is signed, not in sequence.

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FAQ

Is a Letter of Intent legally binding?

Generally, no. An LOI outlines proposed terms and signals serious interest, but it's typically non-binding. The Purchase and Sale Agreement (PSA) is the actual binding contract.

What's the difference between an LOI and a PSA?

An LOI is a non-binding proposal outlining key terms, used to get both sides aligned before investing in a full contract. A PSA is the binding agreement that actually commits both parties to the transaction, including detailed terms, contingencies, and deadlines.

How long does it take to close on a commercial property?

Typically 60 to 90 days from LOI to closing, though the timeline depends heavily on financing complexity, due diligence findings, and how quickly title issues (if any) get resolved.

About the Author:

Michael Bess spent 5+ years as a full-time commercial real estate analyst underwriting multifamily and industrial acquisitions, including LIHTC and market-rate portfolio deals. He built Model The Deal to share the educational content and financial modeling tools that came out of that experience. Read his full bio here.