It depends. Usually at a yard sale, I tell the person I know it's worth more, but the cash I have in my pocket is what I have. That's how I walked away with a Nikon F kit at a yard sale for $40 once...the interaction began with a woman asking if I was looking for anything in particular, and I replied with the obvious. She grabbed a box down from a dusty garage shelf, and inside was an F kit with 50/1.4 and 135/2.8 nikkors. She asked me to throw her a price, I did, and she wanted over $100...she had bought it new and knew it was worth something. I had two $20 bills in my pocket and showed her. I told her it didn't really matter if I bought it or not, and if it was distressing her too much, to not do this deal. Some hemming and hawing later, with her kids telling her she'd never use it, and I was loading it into the pannier on my bike. She knew it was worth more, but chose to sell it to me for less. She also mentioned a hasselblad kit, and I told her to just go to the reputable used gear dealer in town, since they would give her a fair price, unlike me.
Another more recent one:
I stumbled upon a ridiculous cache of gear on eBay...old leica screwmount stuff. Tons of it. Contacted the seller half an hour after the listing went up, trying to get him to sell outright. It was incredibly vaguly listed. He didn't want to end it early...no hard feelings on my part. He knew it had value, he just didn't really care. In the end, it was down to a day with no bids. He contacted me, worried it wouldn't get bids, and he wanted to list it more specifically, but was anxious because 'ebay wouldn't let him end it.'
I informed him he could indeed end it, and told him how to do it, and offered to identify the gear so he could get the money he deserve. He thanked me graciously, and told me to toss him an offer--the condition was that he take it or leave it, no haggling, no counteroffers. I sent him my offer, and continued with my offer to help him identify/list the gear (for free) if he thought my offer was too low. He took my offer, and said that if I was going to go through the work of identifying it for him, I should be the one to profit. In the end, we were both happy--I had a very nice phone conversation with the older gentleman, and we arranged the payment and shipping details. Beyond just getting a good deal, it was just a nice, human interaction, which is seeming to becone rarer and rarer.
Honesty goes a long way with this stuff.