We are planning to replace them either way (estimated cost of $50k total), but I'm wondering if we should go back to the seller and ask for a credit?

If this is a concession, then it should be a credit at settlement and there would be no need for escrow as @Mike McCarthy indicated.

Banker told me i could either do a Cash Out refinance or that I can put it down for collateral and get a Line Of Credit.

If the lender was willing to lend 100% of the purchase price, you wouldn't have to circumvent that by having the realtor credit the buyer 25k.  

I had a perfect credit score of 780, it's all gone now.

About 1/3 of the deals fall through at their end because people "have stuff happen" in their lives like Job Loss, Lose Momentum getting credit cleaned up, Medical Issues, Divorce, "Changed their mind", Don't REALLY want to be home owners, etc.

A credit history.

Are you prepared to take him/her to the tile store, paint store, carpet store, countertops warehouse, plumbing fixture store, etc.? 

I just don't want her to put everything on credit and then end up upside down on the house and in debt.I would gladly buy the property from her and renovate it myself but I don't have the finances to do it now.

The house is valued just under 200k, but he really doesnt have the right credit to refinance just yet.My husband and I have about 20k to work with.