Focus a lot on the kitchen counters, hard surfaces.

For my rehabs, I pull owner builder permits where needed even for work done by licensed contractors.My jurisdiction does not require permits for cabinets, counters, or flooring replacement.  

I'm sure some policies have all kinds of language in them, but if it guarantees me full replacement that is what I would expect otherwise my granite counters would be replaced with laminate and my tile and hardwood replaced with vinyl and the cheapest carpet.

I initially offered $200K in cash, but the seller countered at $240K.

Originally posted for 100k over what the purchase price was I submitted an low offer and received a counter.

I initially offered $200K in cash, but the seller countered at $240K.

They used to approve these over the counter.

You owe your counter-party a standard of honesty and transparency - be sure they understand that you are an agent, but don't represent them, and are looking at their house as a for-profit investment.The pros and cons have been discussed endlessly on BP.  

Can you arrange for counters, floors, painting other “basics” without him tacking on his 20%?

Anyone that has sold items privately would have countered any offer.