They were asking $120k, I had seen that there was a price reduction from another agent for the same property to $115k. 

Keep track of the price reductions in an area.

Presuming no other reductions to the capital gain it could be $700,000 minus $125,000 equals $575,000 capital gain for which the tax could 20 to 23% or $115,000 to $132,250.You could save a ton of taxes and not have to do a 1031.

After working on other FM/HP deals, I'm finding that if you drop all contingencies (except title), they will take a reduction in price.

Update (although a little late as this closed back in June)Deal closed.The second buyer also failed to perform and I had to place this property back on market, drop the price 2 more times for a total price reduction of $40k.

however it sounds like you have some sort of outlier project were advanced knowledge of the end sales prices was not possible to establish with any certainty .One thing we all have seen if your in the RE brokerage business though is homeowners interview 3 realtors.. and they list with the one who told them the highest price.. happens often.. and there is no question some realtors will high ball in the hopes of getting price reductions as time goes on... instead of being realistic out of the gate but stand a chance of not being picked as the agent to start with.

In addition, we also distribute specialized MLS searches to keep investors abreast of all the new REO, short sale, expired, or price reductions on MLS listings.

The lender will always specify that the Loan to Value percentage is based off either the purchase price or the appraised value, whichever is lower :( So as many have said here already they will not allow any reduction in price to be considered. 

The beauty of long-term cash flow is a reduction in volatility.

There are 5 bins...cashflow, appreciation, principal reduction, tax deduction, mortgage interest deduction.