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$1000 is a good "low-risk" offer, but not likely one the owner would accept (immediately) if the body and interior are in good condition. I'd try it anyway and just give them my number if they changed their minds. No big loss if they decide not to sell to you and wait for a better offer.
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Yeah I think I would have to walk away if they won't take $1000. The risk is too high for any non-running vehicle and especially of german descent. I'm trying to figure a number where I just quit and have to part it if I can't get it running. I don't want to part it but I think I have to consider the worst case scenario. It's only worth about $3k to $3.5k running. It's amazing how cheap these are going for.
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Can you not just slam a new ECU/key combo in it off ebay and reprogram? I believe the E46 people know this magic.
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That would be the best scenario and one which I'm gambling on. It's possible all it needs is a key but, if they don't have a service history, it could need a DME just to get it to run. What I'm concerned about is what I might find after It runs. There always seems to be something they forgot to tell you or just happens to go out a week later, haha.