You can ask for anything you want when your offer is presented. That doesn't mean you'll get it, but you can ask.

I would figure out how much the house would be worth in perfect condition, then figure out what it will cost to make this home perfect. Subtract the costs to renovate from the value of this house in perfect condition and that is what I would offer.

This sounds a lot like the lake house we bought in 2008. Built in 1964, it needed tons of work. When we made our offer we included a very respectful letter explaining why our offer was low. We didn't over state anything & were quite thrify on our estimates for repair. We did not include any concessions for cosmetic changes - those, we reckoned, were our choice. The house had past termite damage, a failing retaining wall, no central hvac, a 45 year old septic system (we had full inspection & it's still working fine)that will eventually need replacing.

We accepted their counteroffer.

A year & lots of work later - we have a great weekend house, in a great location that we could not have afforded if it had been in perfect shape when it was on the market.

The sellers were very reasonable, but so were we. They did not want to repair or replace anything & we were fine getting the "discount" on the front end to do it ourselves.
We also knew a previous offer had just fallen thru because the buyers wanted too much fixed & we figured it couldn't hurt to try.

Good luck!

You don't say if you HAVE to sell your current house in order to buy the fixer-upper. If you do, the first thing you need to check out is what your house is worth and how likely it is to sell. After you get over the shock you need to pay for a bank appraisal of the lake house and see just how far the price may fall. A lot of the people that are out there shopping for properties now are not the kind of buyers that dip into savings to make up the difference between the appraisal and the asking price, they're only paying the appraised value and using their savings to fix the place up. I imagine that if the place has been on the market for years the owner either has to sell at a certain price or they just refuse to see that things are no longer worth what they were a year or so ago.

I wouldn't get to the point where I was paying earnest money or signing any documents without a buyers agent unless you know what you are doing.

we will be selling our primary home to buy the new one. given the comps, we should get enough out of ours to buy this place free and clear, but will probably have to finance some of the remodel.
of course fate is fickle, and while i have an extremly desirable location for comuters and great schools, it is best described as a vacation or second home, since it has two bdrms and a studio apt, which we've always had rented.
but our zip code isn't the sexiest one--we live twenty miles from a very famous and popular ski area on a lesser mountain which appeals to local families (day skiers) and vacationers who prefer to avoid the crowds and the lift lines.
our place is a real three season vacation home, not only is there sking and snow sports, but we have a large brook directly behind the house with waterfalls and swimming holes and a privatly owned covered bridge. you can swim, fish, hike, and mountain bike right from the backyard, so i think it attract active outdoorsy types who want a home where they can play and entertain. we have a large extended family, so when we remodeled we incorporated a large great room with wet bar and can easily seat forty for dinner.
if we lived in the neighboring resort area, we'd have this place listed for much more, but then again that area has a ton of listing just sitting, and this neighborhood has more activity, since it's got less listings, if that makes sense.
the apartment could easily become a bdrm suite again,if someone needs it, but as as second home it works really well as a caretaker apt.
i will be shopping around for a buyers agent to represent me and getting the house ready to sell.
now to find that statue...

Good luck!!

Do what was mentioned above...
Figure out the value of the home if it was in good shape and then subtract out the costs of getting it up to par, and then add 10%. This is about what it is worth. Another great suggestion is the letter explaining how you came up with the price.
Also, why would you not use the same agent that is listing your home to be your Buyers agent too?
Good luck.

Do yourself a favor and before you make the offer do some checking into the lake's laws and regulations and see if there are association fees or sewer fees. Many lakes have opted for cleaner water and to get it they no longer allow individual sewage systems instead you have grinder pumps and fees associated with those. You should also check and see what rights go with the property, some have restrictions on boat size and usage as well as restriction on how the docks can be built and by whom it can be used. Many lake front properties have right aways running all over the place which over time have either been ignored or not enforced, which is fine till someone decides they want to push the point.

My first suggestion is not to obsess about any home until it's yours. Obsession will only cost you money, aggravation, and inevitable disappointment. You're clearly unskilled in this area and need an agent to represent your interests 100%. I'm glad you recognize this.

Don't think you're the only one who is unwilling to pay full price for the home. Assuming their asking price represents todays fair market value of a pristine home, the best offer you can make is one that subtracts all repairs, including a healthy contingency, plus something for your time and risk. The sellers could do this themselves and ask FMV or you can do it. Don't pay their price now and add repairs on top of that.

Most homes are priced based on the condition of the home. If the home was in "pristine" condition it most likely would be priced much higher. I think you can probably negotiate since its been on the market for so long but subtracting the cost of your renovations would be a very low offer.

I know you said you "most likely" would buy this free and clear, that will most likely be your only choice. Most banks won't finance a house with no heating system or septic system. This will most likely have to be a cash deal.

One thing you should check on the house is about the septic. Is there enough room to put in a septic given the house is on a lake and most likely has a well system. If the lot pre dates zoning ordinances, there may not be enough room between lake, well and leech fields to do what needs to be done. Perhaps this is the reason the house has been on the market for so long? Its very odd that a waterfront home in ANY condition has been on the market for five years. Most people knock those things down and build million dollar homes. Waterfront property is a hot commodity.

A septic system and a heating system for $50k seems like alot of money unless you need some sort of special above ground septic system. I'd get some estimates, so you have a better feel for what you're looking at.