Need Creative strategy for this project

[Michele Williams]

I know there is a deal in this scenario, I just am not quite sure how it looks. Here's the situation:

I have a once beautiful 1970s house in a great neighborhood in a beach area (Lewes, DE). Owner, who has his private residence just several doors down to the subject property, paid $250K in March 2015, and another $35K impact fee is owed as of April 2017 for installation of county septic and water. So owner is in the property for $285K. Problem is that house has been vacant for 2 years, and a tree fell on the roof, and was never fixed; therefore, mold, water damage, etc.  He wants to sell but also wants to recoup his initial investment. 

ARV $380K and rising. Repairs $125K. With traditional calculations, MAO is about $115-120K. This doesn't work for the seller.

I was thinking that the seller hold some of the note, and the end buyer bring the rest of the money to the table so that we (the rehab investors) can get costs and profit ($125K + $125K), the seller would still own the house (collateral on the note) but it is now fixed, and the end buyer gets a fantastic house. Everyone is happy. 

But the numbers don't add up. Using the logic above, the ARV would have to be $285K (the owner) + $125K (costs) + $125k (rehab investor profit) = $535K. Appreciation is happening fast, but not that fast.

Anyone out there have suggestions for another creative solution? Thanks in advance.