Depends on what you're comparing it to. Sounds like you need a local Realtor to visit and go over how to compare homes so you get a better idea of what the value is.
It really doesn't matter what the rehabber bought it for. And--really--it doesn't matter what it's listed for. What matters is what the home is worth. It may be worth $270,000, in which case $260,000 is a real bargain. It might be worth $235,000, in which case you'd be overpaying. There's no way to tell from the listing price.
You probably just kind of picked a number out of the air. (I apologize if I'm incorrect.) As noted above, that could result in you overpaying. More likely, though, it could result in you not getting the home.
Here's what you do. Find a Realtor you trust. Not the listing agent. Ask your Realtor to run the comps. To prepare a CMA (comparative market analysis) on the home. That's to figure out what the house is actually worth. Then pay no more than that. Perhaps offer less. Your Realtor can provide advice on that.
One other observation: Many rehabbers I know deliberately price their homes a bit under the market so they'll sell quickly. I'm not saying this is the case with the home you're interested in, but with a similar scenario (rehabber buys it for $150,000, rehabs it, and puts it on the market for $260,000), the house actually could be worth $270,000-$280,000. Why? The rehabber wants a quick sale and wants to make sure it appraises for what the contract price is. And the rehabber is making plenty of money at $260,000. Again, that may or may not be the case with your house.
So, get a Realtor to run the comps. Then, based on the comps, make an offer.
Hope that helps.
Century 21 American Homes
Hope this helps,
Deborah Rigsbee Miller, Real Estate Broker
Coldwell Banker HPW - Durham, NC