1) The house was built with galvanized pipes and after 41 years there is rusty water coming out and noticable loss of water pressure when more than one faucet is running at once.
2) The heating ducts under the house are sagging open and in one spot a coffee can has been used to replace a heat duct section (I'm not kidding).
3) The hot water heater is 17 years old and leaks slightly at the top. The original warranty was 5 years.

Our closing costs are $5000. Would it be fair to ask the sellers to pay our closing costs in lieu of renegotiating the price? I don't want to be nitpicking, and they did just install a new roof, but I think the above items should be in better shape.

There were a lot of other items on the inspection that were just not required by code in 1969 (GFIs, smoke detectors, chimney cap, only four foundation vents, etc.) that we're willing to fix or add ourselves, but clean, clear water should be a given.

From what I understand, (experts please step in here!), "Seller pays closing costs" doesn't get you any benefit other than bringing less money to the closing table. How it has been explained to me is that the closing costs are "paid by the seller", but that amount of money is part of the loan that you will pay for the next 30 years. If that is correct, then it would be better to ask for $xxx.xx in the Inspection Notice part of the negotiation.

Again, experts please step in to explain this better then I did!

Actual defects are another matter. A leaky water heater is a safety concern and needs to be replaced. A heating system should be functional in every way, including the duct work. It is a pretty inexpensive fix though - some screws, maybe a couple hangers, some tape, and a few feet of new ducting.

As for the rusty water, galvanized pipes rust. There is nothing the homeowner can do short of replacing the entire plumbing system in the house. That is obviously a major expense.

re: weed30 - no, you have that wrong. Closing costs are paid to the lender and other professionals you use in closing - appraiser, lawyer etc. Somebody has to pay them. There are 3 options. The seller can agree to pay them out of the proceeds of the sale. The buyer can agree to bring money to the table to pay them. Or, the lender can agree to add those costs to the loan principle and pay the cost upfront in exchange for 30 years of interest.