Moldy wall is do to water from somewhere. That would be the big question. You need to be rprepared for much more work than you anticipate. Once you start open walls and removing floors you never know what you might find. Then you als need to meet current codes. I have never had to earthquake retro fit. I imagine that could be expensive.

See if you can get at least one contractor to act as a consultant to give you some idea of cost involved then add at least 10% for the unknowns or the 'might as wells'.

Living in a house that is undergoing renovation can put a strain on a relationship. We did it when we were much younger and my wife swore never again.

You wonÂt really know how bad it is until you open the walls. Don't underestimate the time required for a project or the cost of the required tools. It will usually take longer and be more expensive than you think. One of the challenges of working on old construction is the series of surprises you get as you dig into the problems. With no construction experience, you will need to do a lot of research and hopefully find a mentor.

If you love tools and enjoy using them it can be a lot of fun and you will acquire a good set of tools and construction skills. If you are doing this purely to save money the ROI is questionable unless the house is surrounded by more expensive properties.
Given the mold I would be looking for a significant discount below market.

I don't know what the real estate market is like exactly where you are, but if I were in your shoes, I'd ask, "Is another, similarly desirable house likely to come on the market in the next 6-12 months?"

If you answer yes, then that takes pressure off getting this house. And if the pressure is off, then you can go to the seller with an offer low enough that it covers some worst-case scenarios (really bad plumbing; leaky building envelope; rotten structure around leak).

At "slightly" lower than average price, this house carries a lot of risk.

Find an independent house inspector---not one that regularly works with real estate companies.

The inspection and opioion may cost a couple hundred dollars----a very small price to find out how many thousands will(may) be required to repair the house. That also allows you to have a much better idea of what is really needed---and you can better determine the necessary costs.

With this professional opinion in hand, you can go to the seller and bargain---drop the price $xxxxx and we will sign today.

Others have mentioned the mold issue so I'll skip that. Someone (either you or an inspector) really needs to look at the floor joists under the bathrooms. If the leaks have been long term, you might be faced with some mighty extensive repairs. The only way to know for sure is get under the house and check for rot.

Just saw an episode the other night of The Millionnaire ... (RE dealers) where a million dollar home was found to have a couple of warping floorboards due to water. By the time the water source had been traced down to an outside area, the fixing job added up to thousands and thousands of dollars to reconstruct half the property and house! It's a classic "can of worms" problem, or can be, depending on the water source, and it's buyer beware with those things.

let's see, known roof leaks and mold int eh house. that could mean the roof is causing the mold and there could be rotten frame members behind the walls. so you rip off teh sheetrock and now find you have to replace teh frame in a large portions of the home. this requires removing all teh electrical and plumbing, so when you put it back you must update to current codes. plus you may have to earthquake proof the framing, again not cheap. so what looks like it could cost less than 2500.00 to fix now, coudl in reality be tens of thousands!

my grandmother's house had mold in the bathroom due to teh exhaust fan quitting years ago adn she never replaced it. after she died and the house went back to the bank it sat for 2 years before someone bought it. i found out later that they expected to replace about 6 sheets of sheetrock, but when they ripped it down they found they had to reframe that bathroom, the bath on teh other side the wall, 1 bedroom, and 1 closet in another bedroom. cost them something like 15k and they got off cheap!

We're on house number 4 (Nor Cal). House #1: We had limited money. We "chose" a house that had been vacant for 1+ years. Active termite investation in the kitchen wall, and bedroom wall, 1 bath with a floor that was not safe to walk on, an original kitchen (40 y.o), and a lovely water fall in the living room over the front door (roof issue), along with a touch of mold to add color. We bought and were thrilled because of the potential.

We lived with my folks for the first (2) weeks of home ownership until I was able to get the bathroom fixed. I was handy with tools but had no real experience with DIY home stuff. I had some family / friends with some experience that showed me stuff. I bought tools and I was on a first name basis with most of the folks at the local home depot. My wife is an interior designer so she had the vision, and I was the laborer.

We did everyting ourselves, including the roof tear off (2 lays of comp) against my uncle's (a licensed roofer) strong advice to hire someone. As we dug in we found unexpected stuff, but that's why they sell sawzall blades in multi-packs. It's a lot of work but the material is relatively cheap.

4 years later when we sold the place (for a reasonable profit even though house prices in general were lower than when we bought) we had accomplished: New kitchen (permited), Electrical subpanel, new bathroom, new windows, slider door, new roof, all new copper piping, moved 2 walls, new garage door, new landscaping front and back, paint and molding throughout, 2 dogs, and a 1 year old boy.

House #4 and 18 years later: I'm finishing up a complete rebuild of the house (long story). I have a coral of tools, experience to tackle just about anything and enough sense to know when to call a pro (roofing tear off for sure). For this project we hired framers to do about 80% of the framing including the big beams and cement footings, HVAC guy to install new ducting, and a stucco guy since the BBQ I stucco'd didn't get a passing grade from the wife. Other than that I've done everthing: Finished framing, windows, complete re-wire, new plumbing, roof, drywall (hang, tape, texture), all interior surfaces (except kitchen slab), and so on...

I'm not in the trade and ride a desk for a day job. I enjoy doing the work and I enjoy saving the money. My wife has a taste for the residential work which makes it easy. When we've started projects we're both on board with what it will take. We learned it all by experience starting with jumping in the deep end of the pool.

So "what would you do?" - First, decide if it's the right place (location), second, go back to the seller and get everything you can get ($$ credit against the price), start surfing craigslist for tools (great deals), and lastly, go introduce yourself to the staff at your local Home Depot.