Plan on adding the features you want like garage and fireplace. Find out
how much this will cost. Get the home inspected. Find out what is wrong and
how much it will cost to repair. The bathroom downstairs is a negative.
Find out how much to install one upstairs.

Then deduct the amount of all repairs/additions/changes from what other
homes in the area are selling for. Offer less than that to the sellers,
then don't budge an inch. Seems like you are the only game in town.

You will need to make these changes if you want to sell it in the future,
so plan on doing everything you want to the house over time. Eventually you
will have what you want along with the location.