I met Henry Dvorkan who is a 90 years old Real Estate investors, coach and author in a Conference on buying Notes. He actually wrote the book on buying Mortgage Notes which is worth reading.
He gave me an amazing advice during our lunch which I still try to use to keep deals alive. What he told me what the if one party in the deal will NOT move on PRICE, then the other party has to be allowed to dictate the terms.
If the seller is not willing to move from say $1.4M price, then you should agree on this price, but under your terms where you can pay him a $800,000 now and the rest in 5 years. And if you are convinced the property will appreciate by remodeling it or sheer force of appreciation; then you might want to offer him MORE to keep the deal alive.
It was amazing on how many examples he had on using this technique to accomplish difficult deal.
Good luck and keep us posted if this works for you since I can write to Henry and thank him as well.
The comparables I have are between 765-788k with one that is on a busy street that sold for 666k. So the seller believes he has priced it fairly, its to bad that sellers do NOT set the Market BUYERS do. Since no one has bought this home it is over priced. So as to the value I would go in a bit lower than James suggest between 700k and 725k they probably won't take that offer but it is a VERY good starting point.
Please make sure you have a GOOD buyers agent, there are some good ones right here on trulia.
If you needs assistance please feel free to contact me.
I hope this helps,
Why don't you have an agent helping you with this?