There is a chance that this is a pure bluff (There are companies out there that work on the behalf of carriers that simply call on these leases and get commissions based on any rental reductions). 

That way it is a direct reduction in the amount of money you need to bring and would not be considered income.If that is not an option it would depend on your personal finances.  

I have noticed more and more price reductions all over the place. 

=)If you think it is a matter of them not believing you about the cost of your unexpected findings, I would supply bids along with your reduction request.    

AND it always gets a price reduction is asked before asking price. 10) I want to know if the seller is in fantasy land or reality land...

For example, "improvements" won't be written off entirely this year, but you will want to keep track of for depreciation and capital gains reduction if you decide to sell.

It has been listed by the bank and had a recent price reduction the beginning of April 2014.

Certainly the best time to get a price reduction is during the beginning phases when the developer is trying to generate interest.One of the developers I work with here on Roatan has stopped giving discounts now because he is 75% sold out and traffic is brisk so no discounts.

Anyone received any guidance on being able to do debt reduction/consolidation with the EIDL (not complete paydown and refinance)?  

Boarding fees, servicing fees etc. which on low dollar loans can cause a huge reduction in returns