A deal-ready LOI framework built for CRE brokerage, property management, and advisory firm acquisitions — covering earnout structures, broker retention, and license transferability from term one.
Acquiring a commercial real estate services firm requires an LOI that goes far beyond standard boilerplate. Unlike a product-based business, a CRE services firm's value is tied to licensed professionals, client relationships, recurring management contracts, and transaction pipelines that can evaporate without the right deal structure. A well-crafted LOI for this industry must address key-man risk from day one, define how brokerage license continuity will be handled through and after closing, and establish earnout mechanics tied to broker retention and fee revenue milestones rather than generic EBITDA thresholds. Whether you are a regional rollup operator, a PE-backed platform, or a first-time buyer with a real estate background, this guide walks you through every major LOI section with language specific to commercial real estate services transactions in the $1M–$5M revenue range. Use this as your starting framework and customize with your attorney and M&A advisor before submission.
Find Commercial Real Estate Services Businesses to AcquireParties and Transaction Overview
Identifies the buyer, seller, and target entity, and states the basic structure of the proposed acquisition — asset purchase versus stock purchase. In CRE services, asset purchases are most common because they allow the buyer to cherry-pick client contracts and avoid inheriting unknown regulatory liabilities tied to the brokerage entity.
Example Language
This non-binding Letter of Intent is entered into as of [Date] between [Buyer Legal Name] ('Buyer') and [Seller Legal Name] ('Seller'), with respect to the proposed acquisition of substantially all assets of [Target Business Name] ('Company'), a commercial real estate services firm operating in [Market/Geography]. The transaction is proposed as an asset purchase including all active property management contracts, brokerage listings, client databases, the trade name, and associated goodwill, but excluding cash, accounts receivable accrued prior to closing, and any liabilities not expressly assumed by Buyer.
💡 Sellers in CRE services often push for stock sales to achieve capital gains treatment and avoid individual assignment of each client contract. Buyers should resist this unless they have thoroughly reviewed all state licensing obligations and the entity's regulatory history. If a stock purchase is agreed upon, require full representations on licensing compliance, pending complaints, and E&O insurance history as conditions precedent.
Purchase Price and Valuation Basis
States the proposed total enterprise value, the methodology used to arrive at it, and how it will be allocated across asset classes. CRE services firms typically trade at 3x–5.5x EBITDA, but the multiple is highly sensitive to revenue composition — firms with meaningful recurring property management or advisory retainer income command higher multiples than pure transaction-fee brokerages.
Example Language
Buyer proposes a total purchase price of $[X] representing approximately [X]x the Company's trailing twelve-month adjusted EBITDA of $[X], as reported in the financial statements provided to Buyer. The purchase price assumes a recurring-to-transactional revenue ratio of no less than [X]% recurring, defined as property management fees, advisory retainers, and contracted tenant representation engagements. If financial due diligence reveals material deviation from this ratio, Buyer reserves the right to adjust the purchase price accordingly. The purchase price will be allocated among tangible assets, client contracts, non-compete agreements, and goodwill in a manner to be agreed upon prior to closing.
💡 Sellers will often present TTM revenue that includes a large transaction that closed in the trailing period but is non-repeatable. Push for a normalized EBITDA figure that excludes one-time transactions above a defined threshold and weight recurring revenue at a premium multiple while discounting pure brokerage commission income. Document the agreed-upon normalization methodology in the LOI to avoid disputes during due diligence.
Deal Structure and Consideration
Defines how the purchase price will be paid — typically a combination of cash at closing, a seller note, SBA loan proceeds, and an earnout tied to post-close performance. In CRE services acquisitions, earnouts are particularly important given key-man risk and revenue cyclicality.
Example Language
The proposed consideration structure is as follows: (i) $[X] in cash at closing funded through SBA 7(a) loan proceeds; (ii) a Seller Note of $[X] bearing interest at [X]% per annum, payable over [24–36] months, subordinated to the SBA lender; and (iii) an earnout of up to $[X] payable over 24 months post-close, contingent upon the Company achieving at least [X]% retention of trailing twelve-month recurring fee revenue and total annual revenues of no less than $[X] in each earnout year. Earnout payments will be calculated quarterly and paid within 30 days of each quarter-end.
💡 Sellers should push for clearly defined earnout calculation mechanics with limited buyer discretion over what counts toward revenue targets. Specify whether brokerage commissions from new listings originated post-close count toward earnout thresholds. Buyers should tie a portion of the earnout explicitly to broker retention — for example, a pro-rata reduction in earnout if a top-producing broker generating more than 20% of trailing revenue departs within the earnout period.
Due Diligence Scope and Timeline
Defines the period, scope, and access rights for buyer's investigation of the business. In CRE services, due diligence must go beyond financials to include licensing status, client contract assignments, broker compensation agreements, and pipeline validation.
Example Language
Buyer shall have [45–60] calendar days from the date of Seller's execution of this LOI to complete due diligence ('Due Diligence Period'). Seller agrees to provide Buyer with full access to: (i) three years of reviewed or audited financial statements and monthly P&L reports; (ii) all active property management agreements, tenant representation contracts, and advisory retainer agreements; (iii) documentation of all state brokerage licenses, qualifying broker designations, and E&O insurance policies; (iv) broker and agent compensation agreements, employment contracts, and non-solicitation agreements; (v) a pipeline report listing all active listings and transactions in progress with estimated close dates and projected fee income; and (vi) documentation of any pending or threatened regulatory complaints, commission disputes, or litigation matters.
💡 Sellers are often reluctant to disclose individual broker compensation or client identities before a signed LOI with strong confidentiality protections. Consider a two-stage due diligence process: Phase 1 covers aggregate financials and licensing status; Phase 2, triggered by a go-forward decision, includes broker-level revenue attribution and client contract review. Require Seller to obtain client consent for contract assignment during the Due Diligence Period, not after signing the definitive agreement.
Exclusivity
Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit or entertain other offers. This is critical in CRE services acquisitions where other brokerages or rollup operators may be circling the same target.
Example Language
In consideration of Buyer's commitment to conduct due diligence and incur related costs, Seller agrees that for a period of [60] calendar days from the date of execution of this LOI ('Exclusivity Period'), Seller will not, directly or indirectly, solicit, encourage, or enter into discussions with any third party regarding the sale, merger, recapitalization, or transfer of the Company or its assets. If the parties have not executed a definitive purchase agreement by the end of the Exclusivity Period, either party may terminate this LOI without further obligation, except for the confidentiality and no-shop provisions which shall survive termination.
💡 Sellers should push for a shorter exclusivity window — 45 days is reasonable if due diligence materials are prepared in advance. Buyers should insist on at least 60 days given the complexity of validating recurring revenue contracts and brokerage license transferability. Include a mechanism to extend exclusivity by mutual written agreement if due diligence is progressing in good faith.
Broker License Continuity and Qualifying Broker Transition
Addresses one of the most operationally critical issues in CRE services acquisitions — the continuity of brokerage licenses, qualifying broker designations, and state regulatory standing through and after the ownership transition.
Example Language
Seller represents that the Company holds active brokerage licenses in the following states: [List States]. Seller agrees to cooperate fully with Buyer to facilitate the transfer, reissuance, or continuation of all necessary licenses, registrations, and qualifying broker designations required for the Company to continue operating without interruption following closing. If Buyer does not hold a qualifying broker license in the relevant jurisdiction(s), Seller agrees to (i) remain as qualifying broker of record for a transition period of no less than [6–12] months post-close under a compensation arrangement to be negotiated, or (ii) assist Buyer in identifying and onboarding a licensed qualifying broker prior to closing as a condition precedent to Buyer's obligation to close.
💡 This section is frequently overlooked until late in the deal process and can become a deal-stopper. Buyers without existing brokerage licenses must either hire a licensed qualifying broker before closing or structure an interim arrangement with the Seller. Confirm with each state's real estate commission whether a change of ownership triggers a new license application, and build sufficient time into the transaction timeline accordingly. Budget for E&O insurance premium changes tied to the new ownership structure.
Key Employee and Broker Retention
Establishes the framework for retaining top-producing brokers and key staff through and after the transition, including any retention bonuses, employment agreements, or equity arrangements to be finalized before closing.
Example Language
Buyer acknowledges that the retention of certain key revenue-producing brokers and staff is a material condition of this transaction. Prior to closing, Buyer intends to enter into employment or independent contractor agreements with the following individuals: [Names or Roles TBD pending due diligence]. Such agreements will include compensation terms no less favorable than current arrangements, a retention bonus payable in [two equal installments at 6 and 18 months post-close], and mutual non-solicitation provisions with a term of no less than [24] months. Buyer's obligation to close is expressly conditioned upon the execution of satisfactory retention agreements with key producers generating no less than [X]% of trailing twelve-month brokerage and management fee revenue.
💡 Sellers should push to have retention bonuses funded at closing or escrowed, rather than leaving key brokers dependent on post-close buyer performance. Buyers should ensure non-solicitation agreements are enforceable under applicable state law — some states severely limit non-competes for licensed professionals. Structure the retention bonus payment schedule to align with earnout milestones so that broker behavior supports both retention and revenue performance goals.
Representations, Warranties, and Indemnification
Outlines the categories of representations and warranties the seller will be required to make in the definitive agreement, and the general framework for indemnification if those representations prove inaccurate post-close.
Example Language
The definitive purchase agreement will include customary representations and warranties from Seller regarding, without limitation: (i) accuracy of financial statements and absence of undisclosed liabilities; (ii) validity and assignability of all client contracts and management agreements; (iii) compliance with all applicable state real estate licensing laws and regulations; (iv) absence of pending litigation, commission disputes, regulatory proceedings, or E&O claims; (v) ownership and validity of all intellectual property including client databases and trade names; and (vi) accuracy of all broker compensation disclosures. Seller's indemnification obligations will survive closing for a period of [18–24] months, subject to a deductible basket of [1–2]% of purchase price and a cap of [15–25]% of purchase price for general representations, with unlimited indemnification for fraud, licensing misrepresentation, and tax matters.
💡 In CRE services, pay special attention to representations around commission disputes and E&O claims — these are common and can represent material liabilities. Require the Seller to represent that no broker has a pending claim for unpaid commissions or disputes regarding transaction splits. Consider requiring tail E&O coverage paid by Seller for a minimum of 2 years post-close covering pre-closing transactions.
Conditions to Closing
Lists the material conditions that must be satisfied before either party is obligated to consummate the transaction, including regulatory approvals, third-party consents, and financing.
Example Language
Buyer's obligation to close is subject to satisfaction of the following conditions: (i) completion of due diligence to Buyer's satisfaction in its reasonable discretion; (ii) receipt of SBA 7(a) loan commitment on terms acceptable to Buyer; (iii) execution of retention agreements with key brokers as specified herein; (iv) confirmation that all state brokerage licenses and qualifying broker designations will remain in effect through and after closing; (v) receipt of written consents to assignment from clients representing no less than [X]% of trailing twelve-month recurring revenue; (vi) absence of any material adverse change in the Company's financial condition, client base, or regulatory standing; and (vii) execution of a non-competition and non-solicitation agreement by Seller with a term of no less than [3–5] years and geographic scope covering [defined market area].
💡 Client consent to contract assignment is the most commonly underestimated closing condition in CRE services deals. Property management clients in particular may have contractual rights to terminate agreements upon a change of ownership. Begin obtaining consents during due diligence, not after signing the definitive agreement. Set a minimum consent threshold — typically 80–90% of recurring revenue — as a hard closing condition rather than leaving this open-ended.
Confidentiality and Non-Disclosure
Establishes the mutual obligation to keep all deal-related information, financial data, and client information strictly confidential during and after the LOI process, regardless of whether the transaction closes.
Example Language
Each party agrees to maintain the strict confidentiality of all information exchanged in connection with this transaction, including financial statements, client identities, broker compensation data, and transaction terms, and to use such information solely for the purpose of evaluating and consummating the proposed acquisition. Neither party will disclose the existence or terms of this LOI to any third party without the prior written consent of the other party, except to legal counsel, financial advisors, and lenders on a need-to-know basis who are bound by equivalent confidentiality obligations. The confidentiality obligations set forth herein shall survive any termination of this LOI for a period of [24] months.
💡 In CRE services, confidentiality is particularly sensitive because disclosure of a pending sale can trigger broker departures, client uncertainty, and competitor poaching before any deal is finalized. Consider adding a specific provision prohibiting either party from discussing the transaction with any broker, agent, or employee of the Company without mutual agreement on a communication plan. Plan the employee and client disclosure strategy collaboratively as part of the transition planning process.
Earnout Tied to Broker Retention and Recurring Revenue
In CRE services acquisitions, earnouts should be structured around two distinct metrics: retention of top-producing brokers and maintenance of recurring fee revenue from property management and advisory contracts. Avoid linking earnouts solely to total revenue, which can be inflated or deflated by market conditions outside either party's control. Define a clear formula — for example, a pro-rata earnout reduction for each qualifying broker who departs within 12 months of close.
Qualifying Broker Transition Arrangement
If the selling owner is the qualifying broker of record for the brokerage license, this must be addressed before the LOI is signed, not during closing. Negotiate a formal transition arrangement — either a fixed-term consulting agreement where the seller remains as qualifying broker, or a condition precedent requiring identification and onboarding of a replacement qualifying broker. Define compensation, term, and termination rights for this arrangement clearly.
Client Contract Assignment Threshold
Negotiate a minimum percentage of recurring revenue contracts that must be successfully assigned to the buyer as a closing condition. A typical threshold is 80–90% of property management and advisory retainer revenue. Define what happens if the threshold is not met — either a purchase price reduction, a delayed closing, or a termination right for the buyer. Avoid leaving this as a best-efforts obligation without a floor.
Non-Compete Geographic Scope and Duration
Sellers of CRE services firms frequently continue to hold active real estate licenses and maintain relationships in their local market. Negotiate a non-compete that is broad enough to protect the buyer's investment — typically 3–5 years and covering the primary geographic market — but specific enough to be enforceable under state law. Carve out passive real estate investment activities from the non-compete, as sellers often own commercial properties personally.
SBA Loan Standby Requirements on Seller Note
If the deal is SBA-financed, the seller note will be required to be on full standby — meaning no principal or interest payments — for the first 24 months post-close, in accordance with SBA 7(a) program requirements. Negotiate the seller note interest rate and payment schedule during the LOI phase, with clear acknowledgment from the seller that standby terms will apply. Sellers unfamiliar with SBA requirements are often surprised by this restriction and it can delay or derail closings if not addressed early.
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Commercial real estate services firms in the lower middle market typically trade at 3x–5.5x adjusted EBITDA, but the multiple varies significantly based on revenue composition. A firm with 40–50% recurring revenue from property management contracts or advisory retainers will command the higher end of that range, while a pure transaction brokerage with no recurring income may trade closer to 3x–3.5x. Buyers and sellers should agree on a normalized EBITDA figure in the LOI that excludes one-time transactions, owner add-backs, and non-recurring expenses before anchoring to a multiple.
Most buyers prefer asset purchases for CRE services acquisitions because they can selectively assume client contracts and avoid inheriting unknown regulatory liabilities or commission disputes tied to the existing entity. Sellers often prefer stock sales for tax efficiency and to avoid the complexity of individually assigning each client contract. The LOI should state the proposed structure while acknowledging that the parties will negotiate the final approach during due diligence. If a stock purchase is agreed, require full representations on all open regulatory matters, E&O claims, and broker compensation disputes.
A 45–60 day exclusivity period is typical for lower middle market CRE services transactions. Given the complexity of validating recurring revenue contracts, brokerage license status, and broker employment arrangements, buyers generally need at least 60 days to complete thorough due diligence. Sellers should ensure the exclusivity period is not open-ended — include a mutual extension mechanism tied to demonstrated due diligence progress rather than an automatic rolling extension that benefits only the buyer.
Earnouts in CRE brokerage acquisitions should be tied to two distinct pillars: broker retention and recurring revenue maintenance. A recommended structure pays a portion of the earnout based on whether named key producers remain with the firm through the earnout period, and a second portion based on whether property management fees and advisory retainer revenue meet a defined floor — typically 85–90% of trailing twelve-month recurring revenue. Avoid basing earnouts solely on total gross revenue, which can fluctuate dramatically with transaction markets regardless of business quality.
This is one of the most operationally critical issues in CRE services acquisitions and must be resolved before closing. If the buyer does not hold the required brokerage license in the target's operating state, the LOI should establish a formal plan — either the seller agrees to remain as qualifying broker under a paid consulting arrangement for 6–12 months post-close while the buyer obtains licensure, or the parties identify and onboard a licensed qualifying broker as a condition precedent to closing. Failing to address this leaves the buyer unable to legally operate the brokerage on day one.
Yes, commercial real estate services businesses — including brokerages, property management firms, and advisory companies — are generally SBA 7(a) eligible as long as the business meets SBA size standards and the buyer meets creditworthiness requirements. SBA financing typically covers 80–90% of the purchase price with the remainder structured as a seller note on standby. Buyers should disclose SBA financing intent in the LOI and alert the seller to the standby requirement on the seller note, which prohibits principal and interest payments for the first 24 months post-close under standard SBA guidelines.
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