For $40,000 the buyer should expect a few things not to be perfect.
A buyer insisted I pay for a new roof. Sure, it needed a new roof, but so
what?
The next week I sold for the full asking price.

So, unless $40,000 is too high you shouldn't be thinking of fixing anything.

when was that? sorry its no longer a sellers market and the fact
remains most insurance companies will not write new policies on home
with K&T and a buyer CANT buy a home without homeowners insurance and
even a cash buyer will want homeowners.......

Thje OPs home isnt saleable as is and this problem must by law be
disclosed to all future buyers.

It cost big bucks to keep a vacant home alive, insurance, utilities,
repairs.

might be better off to reconsider that buyer................

there is NO FIX short of rewiring that will make that K&T disappear