Let's look at your questions:
An investment company purchased the home four years ago for 56k. Some nice interior improvements were made and it went back on the market 18 months ago for over 150k. Months later 130, now under that amount.
ANSWER: The market is saying it was overpriced at $150,000. Still overpriced at $130,000. If it's been at the current price for more than, say, 2 months, it's still overpriced.
Since I was doing homework with an agent friend, I was able to discover the prices then vs the current price. Do I have the right to mention this?
ANSWER: You have the right to mention anything you want. However, what matters is the price today. Markets change. Sometimes they go up. Sometimes they go down. The only valid issue is whether it's sold, which it hasn't. And therefore the only valid question is: What is it worth today? And the logical approach for you to take is to make an offer at or below today's value. Doesn't matter what the property was purchased for. Doesn't matter what it was initially priced at. Doesn't matter what it's priced at now. Besides, while you can "mention" the price reductions, I have a sneaking suspicion that the seller is fully aware of the price reductions.
I am not getting a huge bargain and feel without a lot of negotiating power. New cabinets in the kitchen are needed as the current ones don't close and drawers on broken or missing runners, no refrigerator, and I have impressed the need for no carpet.
ANSWER: You earlier said that some nice interior improvements were made. Sounds as if a lot of improvements WEREN'T made. The property shows like crap, according to your description. That's one reason it hasn't sold. While I agree that the current price (whatever it is) is no bargain--otherwise it would have sold--the real question is: What's it worth today? Stay focused on that one question.
Since my agent is somehow working or affiliated with working with the seller alot, would it be unwise of me to indicate my knowledge of this pricing difference?
ANSWER: Huh? YOUR agent is working with or affiliated with the seller? That's not good. You need your own agent, one without a potential conflict of interest. If this is a dual agent situation--the same agent representing both parties--you absolutely need your own agent. Even if "your" agent isn't representing the seller in this case, you'd probably be better off with your own agent. And, again, I've got a sneaking suspicion that your agent--regardless of relationship with the seller, already knows about the pricing adjustments. Look: Get your own agent.
ps. i saw the home last year, and the only difference I notice is new carpet& new lumber under deck
ANSWER: And how does that qualify as "nice interior improvements"? Again, doesn't sound like it's in the best of condition.
Summary: You're focusing on the wrong negotiating issues. You seem to think that somehow your knowledge of the pricing reductions might--or might not--give you leverage. That doesn't matter. Here's what matters to the seller: The seller bought the property for $56,000. He put some minor improvements into it. Probably $5,000 or so. He's trying to sell it for something close to $130,000. He's had 4 years of carrying costs (or lost opportunity costs). He cheaped out on really fixing the property up. He wants out. So, find out what it's really, truly worth in its present condition. Then find out how much more you'll have to sink into it (cabinets, appliances, etc.). Make sure you get a good home inspection. (Check especially the plumbing and HVAC. Likely they're both bad.) The investor might be willing to let it go for, say, $60,000-$65,000. If it's worth less than that, make an offer for less. If it's worth more, start out at $60,000. But don't go above its true value in its present condition.
Hope that helps.