Your local search done by the solicitor should reveal those problems.
Its a hard one maybe as others have said it might just be because it is so large and needs updating that is what is putting people off and maybe the price for what needs doing.
Gut instinct is usually right and like you say you are not desperate so the ball is in your court sounds like they need you more than you them so play it and see what happens.
Good luck with whatever you decide to do.

OH left the navy about 6 years ago and the only place where he could use the skills he had acquired in the 35 years he had been in the navy was with a company in Bristol. We looked at him renting and then at buying. What we actually did was buy the cheapest scruffiest, smelliest house you could ever imagine for a knock down price. It had been on the market absolutely ages, the woman who owned it couldn't understand why she couldn't sell it!!!
We redecorated, put a new bathroom in, smartened the kitchen up by retiling and repainting. Put new carpets and curtains all the way through. Also a nice new gas fire and surround. OH attacked the garden, which was absolutely massive, and tidied it up. Voila!!!! We got nearly double what he had paid for it. Next house, same thing again, this time an old couple living in a large 3 bed semi, it was totally over furnished, you could barely get through the rooms, and needed a really good clean and smartening up. We paid 20k less than the house next door had gone for. First day in we had to rip the carpets out of the downstairs and upstairs loo and bathroom they smelt so bad. We knocked the bathroom and upstairs toilet into one and put in a walk in shower as well as bath, sink and loo. We have put new banisters in, new floor in the hall. Just re-tiling the kitchen at the moment. It is all on-going as they say, as OH is still working full time and I am up here as I have a business to run, but in between times all 3 bedrooms have been completely redecorated and look really smart. Just got the extremely large lounge to do after the kitchen and it will go on the market in the spring. Incidentally when we stripped the wallpaper off, we found the dates of the last time it was done - 1978!!!!
So, my message to you is that people are often put off by houses that are in a poor state of decor and are badly furnished, so they can be on the market for a very long time. As long as you get a full survey done to make sure there are no extremely large gremlins lurking under the floorboards or in the attic it is well worth doing. After you have sorted it all out you will have a house worth a heck of a lot more than you paid for it and be quids in

I wouldn't be put off by the time its been on the market at all..I think the higher the price the fussier the buyer , alot of people don't want to pay 300k and then have to 'do it up' if its the house for you then go for it - you're obviously in the stronger position as they've come back to you with it ..just be realistic with your finances -improvements always cost alot more than you budget for good luck whichever way it goes

Thanks everyone for your input on this, they wanted to come over today to take a look at ours, but we've been down the town Christmas shopping so I couldn't be **sed to clean the place up ready for an inspection!!

Tawney, you're doing great, and in fact we did all that many years ago too!! Really hard work, but it paid off every time, and in fact, one of the houses we bought,I turned into a rest home, filled it up with 8 oldies, and then sold it on 18 months later for double the price!!! That only happens once in a lifetime I think! Trouble is, because we've got the t-shirt on this one, I'm now (and so is Dave, desperately!) totally fed up with all that modernisation business, and I really didn't relish the thought of extending here with all that mess, walls to come down etc. etc. probably have to move out and rent a place for a couple of months, more trauma! Soooo, because this other house is purely cosmetic inside (this is what we are HOPING for the time being!) I don't mind doing some decorating or getting someone in to do it, or all that lovely shopping for new things, and of course, we have already realised what a magnificent expensive house it's gonna be when we finished, but staying put here, we would have a much more comfortable life financially. I suppose since we've spent most of our younger days doing this, we moved every 8 months or therabouts (I was lucky enough that my parents bought me my first house, (well gave me some money which I invested in a house!)that one more gamble might just pay off? Trouble is, although we were interested in it in the first place because of the 2-bedroomed annexe it has with it, I now prefer Mum mucking in with us, so in actual fact, she could move into the massive 2nd lounge adjacent to ours (where the snooker table is now) and put her a bathroom where the bar is as it's quite a big bar area set back in the wall, and she'd be on the ground floor which would be good. There is already a Stanna stair lift up to the 2-bedroomed apartment anyway, which again, just seems all too perfect for our situation with Mum. We did spend nearly 4 hours during 2 visits on the first day to this house, they are lovely people, and they've lived there 17 years, but I really don't think they can afford to spruce it up or in fact live there any longer and that's why they want out. We would also have an income opportunity in the future by letting out the 2-bedroomed self-contained flat, as well as Dave being able to work from home in years to come when he sells his business. What I don't want to be in, is a situation where if we ever needed to sell quickly, the house might be a milestone around our necks, but then again, with what we intend to do to modernise it, it could go quite quickly, and with quite a hefty profit in store for us? It's all a bit pie in the sky though isn't it!!

Let's wait and see if they like ours tomorrow when they come, coz if they don't it's all off anyway, and the next big hurdle will be what price they will accept for an exchange. We are still sticking to our guns that we won't offer more than 90K, or maybe 100K at a push, but we're definitely going again for a 3rd time to make doubly sure too, maybe with Dave's builder chap who can look a bit deeper into things than we can! Better get off here and get that hoover out I suppose!!