I recently showed a property that was listed for $70,000 in a neighborhood where many similar properties sold in the $120,000 to $140,000 range. As soon as my buyers pulled in the driveway, they were spouting off defects and the price tag to fix them.
It didn't get any better when we walked inside. The windows were old, the carpet was shot and there was an active leak in the basement.
Much to my surprise, the buyers were subtracting these repairs from the asking price and they were getting pretty darn close to asking the seller to write them a check in order for them to buy the property. The more I tried to talk reason to these folks, the more they gave me the evil eye and acted like I was working for the seller.
When I work for buyers, I work for buyers. But I don't like wasting everybodies' time and emotions writing offers that are incredibly unrealistic, unless the buyer will acknowledge that the offer is unrealistic but wants to give it a shot anyway.
When a house is priced $50,000 less than a similar property in better condition, it is safe to assume that the seller at least tried to price it for condition. Did they price it fairly? Only doing some homework will say for sure. Start with a list of repairs. Research what it cost to have the work done and subtract that from typical market value in the neighborhood. Then start negotiating with the seller.