What is Expression of Interest or EOI in Real Estate?
Last Updated on, August 25th, 2024
Expression of interest is an official document that a potential buyer submits to express his/her interest in real estate investment. It is not a legal agreement. It is the first step before the negotiation process.
It is non-binding; it does not make the buyer legally bound to proceed with the property transaction. It just evaluates the buyer’s intent and seriousness to proceed with the property transaction. In simple words, it serves as a starting point for negotiations and creates a foundation for further discussions, background verification, and potential registration.
EOI is commonly used in quite a few real estate transactions, including under-construction residential projects, commercial projects, sale of plots, and even off-market properties.
Why Do Developers Invite Expression of Interest (EOI)?
Developers invite expression of interest (EOI) usually in the pre-launch phase of the project. Here are some ways EOIs are beneficial to the developers:
1. Assess Market Interest
By inviting EOIs, developers can gauge the level of interest from potential buyers before officially launching the project.
2. Understand Buyer Preferences
EOI allows developers to understand buyer preferences at a deeper level. Developers can analyse trends such as which floor or unit configurations have higher demand, and much more. Such insights enable developers to increase the overall appeal of the project.
3. Strategic Planning
EOI serves as a strategic planning tool for developers. By knowing buyer preferences and their interest, developers can create targeted marketing campaigns, set realistic sales targets, and allocate resources more efficiently.
Advantages of EOI in Real Estate
There are quite a few benefits of Expression of Interest in real estate for potential buyers.
1. Early Access to Property
The most important benefit of EOI is that it offers you early access to properties, even before they are officially launched in the market. This provides you with a competitive advantage over other buyers.
2. Higher Chances of Negotiation
EOI opens the door for negotiation. If the developer wants to sell their inventory faster and you have made a compelling offer, they are likely to go ahead with the deal. It gives you more negotiation power and increases your chances of securing a good deal. You can either get an upfront discount or a better configuration.
3. Promotes Transparency
EOI clearly highlights the buyer’s interest, terms and conditions, and his financial capabilities, reducing the likelihood of misunderstanding and disputes later.
4. Saves Time & Resources
Even from a seller’s point of view, EOI benefits them as it saves their time and the high cost of advertising the property. Depending on the inventory, a seller or developer can focus only on a few capable buyers who have submitted ROI. This increases the chances of a successful deal, saving them the time and effort to promote their property.
Process of EOI in Real Estate
1. Invitation for EOI
Firstly, developers invite EOI during the pre-launch stage of a project. The EOI window typically lasts for 10-30 days. Developers reach out to potential buyers via Whatsapp and email marketing campaigns.
2. EOI Submission
Interested buyers can submit the EOI to developers within the EOI timeframe. Mention all important details in EOI including the desired purchase price, finance arrangements and settlement period.
3. Evaluation
Upon receiving EOIs, developers review all the EOIs to gauge market interest and assess the desired demand. This evaluation helps developers in determining the appropriate pricing of the property and the type of demand.
4. Engagement
Developers engage with customers who submitted EOI on a first-come, first-serve basis. There are negotiations with respect to the purchase price, configuration and other aspects of the property.
5. Decision
If both parties are on the same page concerning all the terms and conditions, the seller takes a final call. If the seller accepts the EOI, the letter of acceptance is issued.
6. Registration
On receiving the acceptance letter, the buyer can proceed with a formal offer, pay a token amount and complete the registration of the property.
When Is EOI Used in Real Estate?
1. Sale of Property
A property owner can invite potential buyers in their network to submit their EOIs. This helps the property owner to access interest levels and offers before formally selling the property via channel partners and online brokers.
2. Lease of Commercial Space
Commercial property owners or developers utilise EOIs to gather information from potential tenants interested in leasing the space.
3. Under Construction Projects
When launching a project, developers use EOI to gauge the interest levels of potential buyers in the market.
4. Land Acquisition
Landowners or government agencies may use EOIs to identify potential customers and begin the negotiation process.
Differences Between EOI, Token Amount & Booking Amount
| EOI | Token Amount | Booking Amount | |
|---|---|---|---|
| Payment | Minimal payment required | A small sum of the amount has to be paid to confirm the buyer’s intent to purchase. | Payment equivalent to a certain percentage of property has to be made. |
| Payment Refundability | EOI deposit is refundable if either party does not accept the offer | The refundability of token amount depends on the terms and conditions | Depending on the terms, the booking amount can be partially or fully refundable |
| Purpose | To express interest in purchasing the property | A small amount is paid to confirm the property purchase, followed by payment of the booking amount. | Reserve or book the property in your name by paying a certain % amount |
| Legal Obligation | Non-binding | Legally binding as per the terms of the booking form | Legally binding |
| Timeframe | Preliminary process, a proposal is submitted to engage in further discussion and negotiation. | If the offer is accepted, a token amount is paid. | Paid when the buyer has confirmed the transaction. This is followed by registration of property. |
