In this guide
- What an LOI binds and what it leaves open
- The sequence of due diligence, and who waits on whom
- How the licence application runs alongside the deal
- Where financing tends to slip late
- What happens on closing day, including items unique to a care home
Key takeaways
- An LOI is mostly non-binding on price and binding on exclusivity. Check which is which.
- Due diligence covers three files: property, business, regulatory record.
- The licence application often cannot start until the purchase agreement is signed, so it sets the calendar.
- Financing fails late more often than early — on appraisal, coverage, or a change in earnings.
- Closing day includes items a normal sale never sees: resident trust funds, prorated care fees, a licence effective date.
What does an LOI actually commit you to?
Most of a letter of intent is non-binding — but not all of it, and the binding parts are the ones that constrain you.
An LOI sets out price, structure, what is included, the deposit, the diligence period, and a target closing date. Those terms are normally expressed as intention, so either side can still walk or renegotiate when the definitive agreement is written.
The clauses that bind are usually exclusivity, confidentiality, and cost allocation. Exclusivity is the one that matters: for its duration you cannot market the home or talk to other buyers. Sign a ninety-day exclusive with an unfunded buyer and your home is off the market for a quarter.
So negotiate it: short exclusivity, a deposit tied to a milestone, and an explicit list of what is included.
What happens during due diligence?
Three files open at once, and the buyer's team works them in parallel.
The property. Inspection, mechanical systems, survey, title, and a lender-ordered appraisal. Life-safety items — egress, sprinklers, alarms, accessibility — get more attention than in a normal residential sale, because a deficiency can affect the licence, not just the price.
The business. Three years of financials tied to tax returns, rent roll, resident agreements, census history, payer mix, staffing rosters, vendor contracts. This is where a seller's recast gets tested line by line.
The regulatory file. Licence, survey history, plans of correction, complaint records, conditional status. Buyers request the state's file directly rather than relying on what the seller supplies — see the full due diligence checklist.
The purchase agreement is drafted while all this runs, and findings feed into its representations, warranties, and any holdback.
How does the licence transfer run alongside the deal?
In most states the buyer does not receive your licence — they apply for their own, on the regulator's clock, not yours.
Mechanics vary widely by state. Some require the application well before the transfer date; some require notice to residents and families; some run a pre-licensure inspection; some will not accept one until a purchase agreement is signed.
Because the application usually needs the executed agreement, the sequence runs: LOI, diligence, signed purchase agreement, licence application, closing once approval is in hand or imminent. That ordering is why a deal that looks like a sixty-day close is not — see the change of ownership process.
Two practical points. Write the licence contingency into the purchase agreement explicitly, including what happens if approval slips past the outside date. And decide early who operates the home in any gap — some states permit interim management, some do not.
Where does financing slip?
Financing rarely dies at pre-approval; it dies at underwriting, over appraisal or coverage.
The failure points are consistent. The appraisal comes in below contract, leaving a gap someone must fill. The lender's recast of earnings differs from the seller's, so coverage falls short. Census drops during diligence. Or licence approval runs past the loan commitment expiry, forcing a re-underwrite.
The protection is sequencing. Order the appraisal early, keep census and staffing steady through diligence — a soft quarter mid-deal costs more than a soft quarter before listing — and make sure the lender knows from day one that closing depends on an approval nobody controls.
What happens on closing day?
Most of it is standard escrow mechanics plus a few items unique to a care home.
The ordinary parts are familiar: escrow funding, deed transfer, debt payoff, title policy, prorated taxes. Then the care-home-specific items:
- Resident trust funds and deposits. Money held for residents must be accounted for and transferred correctly — in many states a regulated matter, not a contractual one.
- Prorated resident fees. Care fees are usually paid monthly in advance, so the closing month splits between the parties.
- Licence effective date. It should align with closing; a gap means someone is operating without authority.
- Employment changes. In an asset sale the workforce is terminated and rehired, with final pay and PTO per state law — see what happens to your staff. Have the closing paperwork assembled in advance; these closings stall on missing documents more often than on disagreements.
Why does the licence, not the money, set the timeline?
Because financing is a process you can accelerate with effort, and regulatory review is not.
A motivated buyer with a responsive lender can move underwriting along. Nobody speeds up a state agency. Applications sit in queues, reviewers request supplements, inspections happen when there is capacity. Timelines vary between states and shift with workload, so never promise a closing date built on financing alone.
Plan the transaction backwards from the regulatory step. That habit removes most of the frustration about how long a sale takes.
Running the sequence with someone who has done it
The path is not complicated, but it has an order, and what goes wrong is usually what nobody was assigned. An agent who closes these deals regularly knows when your state wants the application filed.
Get matched with a Buy Sell Assisted Living expert who can sequence your sale around the licence approval rather than around hope.
Informational only — not legal, financial, investment, or tax advice. Licence transfer procedures, resident notice requirements, and employment obligations are state-specific and change over time; confirm current rules with your state licensing agency and counsel.