As Rob said, the bank will require a holdback at closing for 1 1/2 times or so the cost of the system repair. Unfortunately, if the reason the seller is not repairing the system is due to lack of money, there probably isn't enough money to escrow 1 1/2 times the cost of the system. If they do have some equity but no cash available for the repair, they might agree to accept more for the purchase price and have the repair completed just prior to closing. Some septic installers will take payment at the closing.
So the big question is whether the property can be purchased at or slightly below market value, LESS the cost of the system repair. That is where it should be priced. Talk to your mortgage person...you may be able to get a rehab loan. Ask for the Title V report so you know why the system failed. If the tank is okay it will save some money. Has the seller had a plan designed? Even if they haven't, call some of the local septic installers such as Biagini and ask if they can give you a ball park of what a repair will cost for the number of bedrooms (plus any future expansion?) at the property. Pick someone who does a lot of work in Marshfield so they are familiar with the various soil conditions around town.
If there is no plan, call an engineering firm to determine what it will cost to have them design a plan and get it permitted. Grady Engineering in Kingston is very proactive and will use newer "alternative" system designs that can save money.
If there is a silver lining to all this, you should be purchasing the property for well below market value, and you should expect to save additional money off the purchase price because of purchasing a property in this condition. Often times buyers purchase property with the system to be installed by the seller and are very disappointed. No matter how well they look at the plan and understand that the yard will look different, when they see the completed project it's not what they imagined.
If you decide to go forward be sure to shop around for septic installers! You'll probably find that prices vary considerably.
My advice - gain advantage through education and flexibility. I visit each town's Department of Health to gain knowledge of the code requirements. Many towns have a list of sewerage system engineers and installers (engineers and installers must be separate). The thought is that these professionals know their business and many are willing to share some ideas about the particular neighborhoods and comments on percolation tests in the past and soil composition (ledge, gravel, clay, water table etc) give a rough idea. Also keep in mind that the number of bedrooms dictate the size of the system - it may be worth while to install a four bedroom system, even if the property has three in the event of future expansion.
Other considerations - a mortgage lender that spells out the criteria tailored to your financial profile. 203K loans, rehab, may be available and considered. This essentially builds the repair or replacement costs into your loan. A real estate attorney, from my vanatage point, is needed before an offer is made to spell out the potential liability issues for you as the buyer and also the seller.
A bit of work, hence a Title V issue detracs many buyers giving you potential for better financial negotiations. Fully understanding the technical side is very important and with the right homework and advice from professionals will provide you with the risks associated with a major decision!
Final point, an agent willing to spend the time to help you map out a plan as a culmination of your research will help your negotiations - A well informed consumer with knowledge of the Title V requirements should make it more likely to introduce your offer in the best light possible.
The law does not indicate that the responsibility for Title V certification rests on the seller. Traditionally the seller has been responsible. Sellers will try and have the buyer be responsible if there is no profit or a loss in the transaction. Banks will not grant a mortgage without doing a hold back of monies to cover 1 1/2 to 2 1/2 times the projected cost of a new system.