So, lots of considerations here: Is the price accurate given the location, age, condition?

If written plans were not part of the contract, then you know your answer, which is #2 (sorry).Most contractors do not draw plans anyway; architects create plans (to scale, etc).

Hopefully that won't happen, but it was a consideration when I bought it, so I have planned for a long hold if necessary. 

As I mentioned I just renovated and sold my home in CA and gleaned some very valuable experience that I intend to draw on going forward. 

If staying in the area and taxes aren't a consideration, renting it out may be a good option.  

If I purchase a 500K house, and I draw 100K from a HELOC and do 25K Cash for a conventional 25% down payment, when I run the numbers do I run it as 125K cash invested, or 25K Cash invested?

Then supposedly they give you 50-200K that you can draw on when needed.

Thinking of ways to pass this onto the seller I may be able to get them to do a consideration on these facts.

Your annual return on the $400,000 will be 3.99%.That's a very simplistic calculation that doesn't take into consideration expenses like maintenance/repair, management/leasing fees, insurance, and, oh yeah, property taxes.

Please take into consideration of neighborhood class/property tax/home insurance cost/vacancy rate, they can all affect your decision making process.