Whether you use or do not use a Realtor during the negotiations with a FSBO is a personal preference. The following 8 rules apply independent of using a realtor and following these will help you go far in the negotiating process.
Try to avoid going back and forth more than three times. Generally, each round of negotiations takes on a specific tone and each round getting more contentious.
Round 1: In the first round, the buyer and seller are thinking about the home.
Round 2: In the second round, they stop thinking about the home and start thinking about the money.
Round 3 and beyond: The third round, both parties stop thinking about the home or money. They start to think about the deal itself—and that's when the resentment sets in. After the third round, egos enter the picture, and things get personal. Don't let the negotiations progress to the point where things get personal.
Most people have only a negative experience with negotiations, usually in the context of buying a car. You like most people are dreading the process of working out the contract. In my experience, dealing straightforward and graciously will result in a win/win outcome for buyer and seller. Make all your reasons for your offering price clear. This will help the seller see your prospective.
Expect the seller to make all their desired changes on the first contract counter-offer if there is any and fully explaining their reason. Get it all on the table and maintain an attitude of cordial respect.
Rule #2: Stay Focused on Completing the Purchase.
Never let the seller's emotions or personality distract you from your goal. Stay calm and gracious, as you would in a business negotiation. You're already at an advantage because they are selling direct and only have two people's agendas to keep in mind—yours and the seller. You share the same goal. Remember, it's not about winning or losing, but about getting the house you want at a fair price. Consider if you live their for 10 years and you paid $12,000 too much, that is still only $100 a month more. Yes, you have a budget. However, the right house is a great investment.
Rule #3: Get Everything in Writing.
Having the all of your requirements put in your initial offer in writing shows that you are serious; having the seller's counter offer in writing tells the you that the seller is interested.
Verbal counter offers are fraught with potential misunderstandings, misinterpretations, and omissions. If there are only one or two minor changes to be made on the contract, you can negotiate those things verbally and put them in writing later, but all major changes need to be out in writing right away.
Way too often the well is poisoned by an offer that looks good for you and bad to the seller. If you want a deal, look for short sales or foreclosures. Some people think "In today's market, I can offer whatever I want." That is true if the seller has to sell. However, if the seller wants to seller it is a different matter. The seller might want to seller, but they don't have to sell…. at least not to you. Sure, you need assert yourself (in a reasonable way), but let's face it Seller are emotional too. Ask yourself WWJD: What Would a Just Deal look like.
Rule #5: Keep everything confidential until it closes.
Never gloat or talk about your purchase in detail with others. You don't want anyone telling your seller that he or she lost money on the deal, which people love to say regardless of the price. Worse, talking too much could shut your deal down completely. I knew a buyer who went around bragging about the price she negotiated for her new home. A neighbor down the street, who had been thinking of buying, heard the price and put an offer to the seller during the inspection option period of the contract. The seller refused to fix anything, the buyer rejected the offer. You can figure out what happened next.
This would never have happened had the original buyer kept their mouth zipped. You don't want to learn this lesson the hard way.
There are a lot of options that will cost you or the seller money. Some in closing, some before closing, and all will take time. When you come across something on the contract that you want to include, mark it and go back to it. Consider the entire contract before you start countering. You can probably live with the one thing you don't like if the rest of the contract is good to you.
Rule #8: Counter a Counter?
Always accept or counter any counter of the contract within twenty-four hours, and preferably within twelve. You want to maintain the enthusiasm in the negotiations. Procrastination is the ultimate deal-killer. After forty-eight hours, an offer is typically null and void in the seller's mind.
The last person to sign or initial is the person that is responsible for getting the contract to the other party. For example, if you make and initial a change on the contract, then the ball is in your court. You need to inform the seller what you did when you did it, and when you'll be dropping (or emailing) off the paperwork. Let your seller know that this is the system you want to operate on and you'll prevent miscommunications—as well as keep the ball rolling.