How To Make A Counter-Offer On a FSBO House (And Get Under Contract)

So you’ve found your dream home (congratulations!) and you discover that it’s a FSBO. What’s a FSBO? It’s real estate language for for-sale-by-owner (and in the real estate industry, it’s pronounced “fizz-bow”).

Maybe you’re working with a real estate agent or maybe not, but the seller is not — they are negotiating terms all on their own. In 2019, about 7% of sellers opted to go FSBO, meaning that if you looked at 15 homes, at least one of those would likely be an FSBO. If you don’t have a real estate agent, you’re negotiating terms on your own, as well.

Either you or your agent write up an offer and submit it to the seller. The seller then comes back with a counter-offer … which you’re not entirely happy with. You really want the house, but the terms aren’t quite right yet. Countering that counter-offer can ensure that you get the exact terms that you’re looking for, and it’s important to make sure you’re absolutely comfortable before you agree to a purchase.

So how do you negotiate when there’s no agent on the other side to be a mediator? And more importantly, how do you get the deal done so you get into your dream house?

FSBO negotiation strategies

The most important step after you’ve made an offer and the seller has come back with a counter-offer is to determine where you have room to negotiate. “The struggle is the negotiating part,” explains Grand Rapids-based agent Justin Glover.

In a nutshell, you need to find your leverage points if you want to counter a counter-offer. What is important to the seller in your transaction?

Price

The price of the home is almost always the most important detail to the seller. In fact, sales price is the most frequently contested item in a counter offer.

Because FSBO sellers aren’t working with an agent, they might not have gotten an appraisal or even a comparative market analysis to use as a jumping-off point for their listing price. It’s entirely possible that they came up with the number based on how much they value their home, which may not be reflective of the market.

“To determine the sale price, a lot of for-sale-by-owners will look at some online valuation,” says Glover Home Group’s Jay Glover. “Or they’ll have a friend who says, ‘Hey, you should list for this’ — or maybe they just had a number in mind that they need to hit to make it worth their while to sell.”

It’s important to do your research and make sure you know how much the home is worth before writing your initial offer, and then use that number throughout your negotiations with the seller. Something else to keep in mind when it comes to price — a FSBO seller will often deliberately price their home at what they think is below fair-market value because they are trying to avoid hiring an agent and paying a commission.

“So one thing that we typically would explain to the buyer that this for-sale-by-owner listing is either not paying a full commission or, hey, offering no commission at all to the agents. So we should take that into account,” says Justin.

Closing costs

Closing costs can be another area ripe for negotiation.

Buyers usually request that sellers cover at least part of the closing costs in a transaction, so revisiting the terms of the closing costs is an option. If you’re purchasing a home in a buyer’s market, you might have more wiggle room with closing costs than if you’re working during a seller’s market.

Whatever the market is doing, offering to make concessions on closing costs can keep your mortgage payment under control while still throwing the seller an incentive in a counter-offer.

Timing

The timing on a purchase contract can be critical, especially if the seller needs more time to vacate the home. If the negotiation process is dragging out, the original closing date specified in a first offer could arrive too quickly for a seller, so consider providing some leniency here as a tactic.

If the seller seems particularly stressed for time and you’re in a position to do so, considering a rent-back provision for weeks or even months could provide you with a strong position in an agreement.

Jay Glover explains:

“If it’s a family who’s moving across the country for a job and they need more time to get moved out, maybe you can say, ‘Hey, we’ll give them a little less money, but let’s give them 45 days after close instead’ and ensure that they’re going to have time to get moved.”

Inspection contingencies

Were there things found during the inspection that needed repairs or updates? Waiving those contingencies or offering to pay for the repairs is another way to keep your mortgage payment down while making concessions to the seller.

Appraisal contingencies

If the appraisal is lower than the offer price, you could agree to pay the difference — up to a certain point. This means making a concession on the price, so keep that in mind when thinking about what your potential monthly payment would be.

Sales contingencies

If the seller is trying to buy a new home that is contingent on the sale of their current home, you might have some room for compromise. In this case, the seller is likely more motivated to sell their existing home in order to get into their next home, so make sure you’re aware of what their situation is.

If the situation is reversed and you need to include a sales contingency in your offer because you have to sell your current home before you can purchase a new home, HomeLight’s Trade-In program might be the solution. When you’re ready to buy your new home, HomeLight will buy your old home in cash, saving you the hassle of having to buy and sell simultaneously.

Earnest money

Money is a universal language, so simply offering the seller more earnest money may get your purchase rolling.

Will the seller counter above the asking price?

It’s possible, depending on whether it’s a buyer’s market or a seller’s market. This scenario is also more likely if it’s a seller’s market and you made an initial full-price offer.

In a seller’s market, the seller holds most, if not all, of the leverage, so they’re more likely to come back with a higher number. If the seller listed the house at a discounted price to begin with, then it’s also more likely they’ll counter with a number higher than the asking price.

However, in a more balanced market or a buyer’s market where there’s more inventory than buyer interest, a scenario like this is far less likely.

Another factor influencing the counter-offer is the appraisal amount. If a seller is going to counter with a higher number, the home must appraise for at least that amount. Otherwise, the buyer will not be approved for that loan amount.

Countering the counter-offer

So how do you successfully counter the counter-offer and get into your new home? There are a few ducks you can keep in a row in order to ensure that your FSBO home purchase goes smoothly.

Get the necessary documents in order

If price is the major sticking point in your negotiations, you’ll want the best possible comparable recently sold homes (comps) available — the most recent, the closest geographically, and those most directly comparable in size and amenities to the property you want to buy.

Write the counter-offer

Every state’s guidelines for preparing a counter-offer are different, so make sure you’re working within the confines of the law. Consult your agent if you have one; if not, think about hiring an attorney to make sure everything is in line.

Secure and sign the check

Earnest money checks are submitted in the form of a cashier’s check and held by the title company until closing. If you’re looking to speed up the closing process, make sure your check is on file with the title company while you’re negotiating.

What if it doesn’t work out?

If something happens and the transaction simply isn’t working out, you can withdraw your counter-counter offer. As long as your offer has not been officially accepted with a signed agreement, you can withdraw it.

But keep in mind that the seller also has the option to withdraw from the transaction. If a seller has multiple offers, they can choose to go with the one that’s most beneficial to them, as long as they haven’t put a formal agreement in writing.

Buying a house can be complicated under any circumstances, but when the house is a FSBO, things can get particularly hairy when it comes to negotiations. If you follow our guide and get all your ducks in a row, you’ll be well equipped to make it through the process smoothly and get into your dream home.

Header Image Source: (Abbilyn Zavgorodniaia / Unsplash)