Termites! Still buy??

[Mary Peacock]

Hello,

We are under contract for $85k (3bed 1bath 944 sqft) property. During inspection they found substantial termite damage and active termites. It has appraised for $10k over what we are looking to pay as-is and the appraiser said if we put $20K in it the value may be $140k-$150k. I think this deal still makes sense, but this is my first investment property so should I pass? I have calls into contractors to give me an idea of what it would cost to repair and the sellers have said they will not budge on the price... 

Thank you for any input!

Mary Peacock