What Does Real Estate Expressions of Interest Mean?

Like all other industries, the real estate industry is evolving with time. The industry, heavily reliant on human resources, has been evolving, and the stakeholders are disrupting the market with new techniques, methodologies, etc.

Whether you want to buy a property in any part of the world or sell it, you must know all options and techniques for safeguarding your interest and getting the best deal.

A term that has lately become tremendously popular in the real estate industry is an expression of interest.

To be precise, it is an option or method that sellers can use to sell their properties. The surge in Expression of Interest sales can be estimated by some stats claiming a 22% jump in EOI sales during November 2020, which is alone in Australia. We can imagine the impact in other parts of the world as well.

But many questions about Expression of Interest have to be answered. A lot of ambiguity lies around in the minds of individual buyers and sellers regarding the EOI working.

Therefore, we are going to discuss everything you need to know about Expression of Interest in the real estate industry.

So let’s get into it.

What Is Expression of Interest?

Let’s start with defining the term Expression of Interest.

There are many ways to define Expression of Interest. Each definition will clarify the concept of EOI and how it works.

So, we can define EOI as,

Expression of Interest is an informal contract binding where the buyer shows an interest in a property on sale without being explicit about the price of the place.

EOI can also be defined as,

Expression of Interest is a sales process where the prospective buyers are asked/invited by the sellers to express their best offer in writing to show interest in the purchase of the specific property. A deadline is also given to ensure that all EOI is received before that date.

Expression of Interest is also called For Sale by Expressions of Interest(EOI). The properties are made available for 4 to 6 weeks allowing the prospective buyers to submit their interest in the property.

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The EOI for any property must include settlement dates, financial conditions, exclusions, and inclusions to clarify everything before proceeding further.

Contents Of EOI

The buyers have to submit an Expression of Interest in writing. Therefore, it is important to know what content has to be covered.

Generally, the EOI opens with some praise for the property you are interested in. Besides, the following things are covered in an Expression of Interest:

1.    Purchase Price

The first thing you have to add to an EOI is to include the highest and best price offer you are willing to pay against purchasing the specific property.

The buyer of the property has the right to change terms related to payment consideration and refuse to execute the transaction in the future as it is a non-binding agreement.

2.    Valuation Method

In general, EOI for mergers and acquisitions contains information about the valuation methodology, assumptions, etc.

However, in the case of the real estate EOI, there is nothing like valuation methodology regarding projections or historical data. Therefore, you can simply skip this part.

3.    Conditions of Sales

Conditions of sales have to be discussed in the EOI. It can include information like the house condition, furnished/non-furnished, etc.

It should also include how you are going to perform due diligence before finally signing in to purchase the house. The other conditions might be around the property’s repairs, maintenance, etc.

4.    Settlement Dates

Depending on the earliest or latest dates you expect the execution of the settlements, you can suggest the settlement dates in your expression of interest for a specific property.

You can also mention if you are urgently looking to settle the property for any reason.

5.    Finance Conditions

Whether you are going to settle the purchase with cash, check, debt, a number of installments, brokerage commission, and other legal expenses are discussed under the head of finance conditions.

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6.    Inclusions and Exclusions of Sales

It would help if you expressed in writing any exclusions or inclusions of sales depending on what you look forward to.

Having clear expectations between all parties of a prospective deal is necessary.

7.    Confidentiality

The EOI is a confidential, written, and non-binding agreement between the prospective buyers and sellers.

It should remain between the buyer writing it and the seller to whom it is addressed. Therefore, confidentiality is also one of the important things you must know about EOIs.

Things To Consider Before Involvement

EOI works like IPO (Initial Public Offering), where the sellers allow the interested people to submit their expectations and possibilities regarding the property.

But buyers must consider a few things before submitting an expression of interest regarding a specific property.

Here is the list of a few considerations you must take note of:

  • Do your due diligence regarding the specific property before you enter the process.
  • Do as much research as possible to get the best price as there is no price guide you should work from. Only your research will help you get the best deal.
  • The information available might not be as open as in the case of an auction. Therefore, consider the fact that you have to do all your homework to know the most about the property you want to buy.

Pros and Cons Of EOI

EOI is a method of property sale & purchase having the involvement of both sellers and buyers.

Therefore, we will discuss both parties’ pros and cons of the EOI method.

Let’s start with buyers.

Pros and Cons Of EOI For Buyers

Pros

  • You can choose to stay anonymous. Since anonymity is maintained as a buyer, you can stay pressure free when competing for a specific property.
  • There is no pressure to bid higher and higher depending on other auctioneers. You can quote what works best for you!
  • EOI buying lets you choose the settlement dates and financial conditions that are possible for you!
  • The financial conditions and sales conditions you think necessary can easily be proposed with your EOI.
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Cons

However, there are a few cons to this method of buying that includes:

  • Since you have to rely on your own research and data analytics, there are chances to overvalue a property
  • You must wait for a longer period to have an answer from the sellers or agents.
  • You never know the extent of competition and pricing like in an auction

Pros and Cons Of EOI For Sellers

Buyers are not the only parties to the non-binding agreement that might benefit from EOI or be at a loss. Sellers also have their own perspectives and pros & cons.

Pros

  • There is no pressure to go into the first person who shows interest in your property. You can choose the best EOI among all that have been sent to you by the interested buyers.
  • If you list your property with an expected price in your mind, you might end up getting less than what you have expected. However, when you rely on the need and choices of buyers, chances are higher to land a better deal than expected.
  • An EOI contains all finance conditions, sales conditions, the highest price a buyer is willing to pay, etc. Therefore, you can choose the best deal that meets all conditions that you are willing to sell.

Cons

  • The competitive environment you get in the auction is not present when selling by EOI.
  • Many buyers hesitate to enter this property buying method as there is no price guide or open information.
  • EOI selling often takes longer than a private treaty sale or an auction. It can be a turning point for sellers who want to sell their property quickly.

Final Words

We have discussed everything you might need to know about Expression of Interest in the real estate industry. Whether you are a buyer or a seller, you can analyze the pros and cons before entering the EOI process.