Negotiating with FSBOs
When you're dealing with homes that are for sale by owner (FSBOs), no real-estate agent is involved in the negotiations. The same principles for negotiating apply, but there is, of course, no middleman.
How do you begin the negotiations? After your second visit to the home you like (the visit where you have explored the house more thoroughly than you did on your first visit), wait a day or two before making an offer, to heighten the sellers' anticipation and to make your offer sound well thought out.
To determine fair market value, go through computer printout sheets you have secured from real-estate agents for similar properties in the neighborhood. The bargaining process is similar in this case to bargaining through a real-estate agent, but sitting down face to face with sellers is always difficult. Remain rational and friendly, and remember that your primary tool for acceptance is fair market value. Your offer hands them a quick sale, no more disruption in having a house on the market, and no sales commission to pay.
Get a lawyer to help with a for sale by owner deal. You should always have a lawyer in a case where there is no real-estate agent involved, but do not use the same legal counsel as the sellers use.
Still, they probably will not accept your first price. So, back you come with a second bid. That should usually be the fair market value minus the usual real-estate commission in the area (probably 6 or 7 percent). Of course, the sellers aren't using an agent, so there is no commission to be paid here.
In the best possible scenario, the buyer and seller will split the amount of the real-estate commission and set the selling price between market value and the price the owner would have netted after paying an agent's commission (if they had used one). All of the extras, such as closing dates and financing, can be worked out then and there, or with the attorneys for both sides present. The attorneys will draw up the contract to buy.
In some cases, FSBOs will be willing to work with you and your buyer's agent, paying your agent 3–3.5 percent commission. They would not have a seller's agent, so they would be paying one commission, instead of two. Ask the FSBO if they would consider this option.
That's how a neat, tidy sale works. But life does not always follow such a script. The sellers may be new to this business and hold out high hopes for a top-dollar price. When you come up against a stone wall, do not beat your head against it, no matter how much you like the house. Write down your best offer, with your name, address, and phone number, and leave it with the sellers. Tell them to call you if they change their mind, and then continue house hunting. You might want to keep in touch with them from time to time to ask how they are doing.
Do not make another offer, but if they do come down a little, perhaps you will be willing to go up a little. This is how negotiating works.
You should never give sellers an earnest-money deposit. That check should be handed to your lawyer.
