He bought the house in 1979 for 58,000 according to the county website and the house was assessed for 136,000 then.  

The basics: Assessed at $89,900Retail value $99,000-$105,0004 bedroom, 3 bath ranchCan purchase for $52,000 by assuming payments of $752 a month including PITIThe house will lease from $800-$8502014 Taxes were $841Estimated annual insurance $750Waiting to hear from owner how many years are left on the noteIf I am figuring correctly, there would be $204 a month positive cash flow along with a $5000 non-refundable option fee? 

Finally, click on the link to the county website that shows on Zillow and you will find the assessed value plus the value of neighboring houses for the most recent tax year.

They're having a horrible time with the insurance company to assess and recommend reputable companies to fix the damage.  

I completely agree with you on your assessment of the Residential market in Madison.

We substituted counsel, scheduled another sale, and made the minimum bid, which in that county, was set at 2/3 of what the Sheriff assessed the value at.

My opinion...The agent can say whatever (s)he wants, but is legally required to present the seller with any offer you make.That said, your offer should be based on your assessment of the market and the condition of the property.

The deadline to appeal the 2015/16 tax assessment has passed.

I say call an agent and have them give you their assessment of selling the property as-is.  

Oh, and don't forget to include a vacancy allowance when calculating income.Here is one of the best explanations of Cap Rate I have seen:http://www.wikihow.com/Figure-Cap-RateThe best assessment that you should use when determining if it's a good investment is a Cash on Cash return.