Let's assume that the comps you have are correct and they say that nothing has sold higher than 205K in the surrounding 4 blocks. That info tells you that there may be an appraisal issue if you purchase it for much over 205K.
The seller may have over-improved the property creating the scenario of the best property on the not so best block (no insult to the seller intended of course). The value of this duplex is hinged on 1) how low you can get the home for and 2) how long you intend to keep it. If you are in it for the long haul, the neighborhood may catch up to the higher price in a hand full of years. You have found the thorn on the rose so to speak when you mentioned that other comparable properties have sold fo much lower than the 205K. As a realtor, when we see that most comps ar significantly lower, this indicates that it may be a few years for you to gain any equity value in that property. Make sure the rental amount will carry you thorugh a few years with cash flow for repairs and upgrades (ex. electric).
If the utilities are not seperated for each unit, you need to calculate that into the equasion as you mentioned. The home will be worth more if the utilities are seperate. If you add the cost to you for upgrading the electric on top of your offer price, you will want that number to be in the range of other comparable properties.
We have had sellers say to us that they are motivated and will consider all offers, but often times when a low offer comes in, the seller's emotions get the best of them. But you know what? As a buyer and an investor, you need to look out for your best interest and emotions really need to be set aside so you can make strong business decisions. It is better to insult the seller with an offer price that you believe is fair then to wrap up a deal that is a terrible value to you.
Long story short:
1) Determine the average price for similar duplex properties and try to get 3 similar comps.
2) Determine the "differential" or the % that the homes have sold for compared to their list price (I assume it will be close to 90% of the list price)
3) Calculate in the cost of upgrading the electric and shave a few bucks off for that.
Start there to determine what you feel good offering as an opening bid. Hope for the seller to meet you in the middle of your bid and his asking price but plan on a possible counter that will challenge that. Stay cool and be mentally ok with walking away fro the property if the numbers do not make sense to you.
We have a few blog posts that may help you. I'd ba happy to forward them to you. No strings attached. Just let me know. Hope this helps. These decisions take a lot of thought and projection.