Seller offering a discount: How to handle?

[Andrew West]

Hi BP friends-

Hoping some experts out there can help me with a situation on a deal that was just brought to me.

A family friend has offered to sell me a single-family home that he's owned as an investment property for about 10 years now. It's a decent house with paying tenants that pencils out from an analysis standpoint, however due to certain characteristics, it just doesn't align with our current investing strategy.

The only reason we're considering it is because he's offered us a 20% discount on the property (from market value). So, the way I see it, we have two options:

1) Buy a below-market single family home (never a bad option!)

2) Buy the home at market value and use his "discount" to cover our 20% down payment on the property. 

Option 2 is much more appealing to us because it effectively means we leave no money in the deal (besides closing costs and potentially a few misc. repairs) and can save our capital for other deals we're looking at.

Does anyone have suggestions for how to handle this in our contract? I know lenders typically cap "seller concessions" at around 6%. In this case, we can totally front the cash to make the transaction happen and handle his "discount" separately. I just thought I'd throw it out there to see if those more experienced have advice. 

Thanks!