But if they don't, lower it another 25k one week later. They will get the message, sooner or later that basically, this is still a buyers market, so why deal with that hassle, unless there is a big enough payoff for it to be worth your while.
2. I would not take on a house with severe water damage unless I was married to the contractor.
3. In today's market on Long Island, we are spoiled for choice, there is no need to take on a house with sever water damage even if you are married to the contractor.
Unless you already own the house, then of course, I would get it fixed (see number 1 above).
*not meant in the literal sense