How is it a "problem" if everything is code compliant? Yes, he should

tell prospective buyers that the house is wired with K&T so they aren't
surprised but that would not fall under the category of disclosing a
fault. UNLESS - of course - the receptacles are grounding type and are
not really grounded. that would be a violation that ought to be disclosed.

nate

The OP reported the following which NOW must be told to any and all
perspective buyers as part of every states disclosure law. failure to
disclose this leavesthe seller at lawsuit risk and it will be hard to
find any buyer to purchase a home requiring complete rewire, ulnless
the new buyer happens to say be a electrician

quote from OP

An electrician hired by a potential buyer said : "to correct the
ungrounded
wiring to the existing receptacles and removal of the knob and tube
wiring a
complete rewiring of the residence would have to be done which would
also
increase the size of upgrading the electrical panel to 200 amps to