@Bill Keast From the appraisal side it would make sense to include it, but when it comes to making offers when those values aren't included the true value of the property is greatly decreased. 

That makes lot of sense to standardize the finishes and it's certainly something that I'm going to work towards. 

If these add up to 11% that makes some sense, but I wouldn't count on driving that number down if so.

There is one problem, the only way this deal makes sense for me is if I buy it for under 85K, but he currently has a mortgage for 125K.

Whether a Roth conversion makes sense to any one investor is a complex matter involving so many factors such as age, income, value being converted, cost of conversion, projected future tax bracket, etc.The cost of the the conversion would be determined based the appraised value of a property, less the outstanding debt. 

We have toured the building, which is structurally sound.There is other interest in the building, but our sense is that the owner doesn't love the offer on the table or that party's intent for the building. 

Does this exercise makes sense, if I want to sell the property individually?

Consider that your “zero” balance if that makes sense.

@Thomas S. makes sense. thanks 

Put in offers that make sense to you.