Notyetthere...
I compared the asking price (£165000) of our chosen house to two other houses in that same street that have sold in the last year, and were both end of terrace like the one we are looking at.
'Our' house has not been extended at all. It is in good decorative order (except that hole in the ceiling) but nothing special.
One of those other houses in that street sold a little over a year ago for £170,000. That house has been beautifully refurbished and extended. Two reception rooms added, plus a bathroom, plus a utility room, and all of it in amazing decorative condition, with wooden floors etc.
Another house, also end of terrace, sold last August for £131,000. Compared to 'our' house it has a very large (but neglected) garden, - enough to built a second dwelling on it! This house was in a very tired decorative state -old carpets, discoloured walls, and it needed a new kitchen. However, it had an additional rear hall/storage and a downstairs toilet which 'our' house does not have, and also tiled floors in bath and kitchen, while 'our' house has lino.
'Our' house has off road parking. Not enjoying having to pay extra for that though; we don't drive so to us it is just a useless ugly concrete slab - a waste of good garden space... 
The other two houses had off road parking too - all houses there have it.
I don't know how much extensions like in house 1 would cost, but I guess loads. I do know how much we spent to get our house in a nice state from the mess it was in, and that came in at about £6000 - including kitchen!
Soooo... according to that the house we are looking at shouldn't cost more than £137000, but obviously they will never accept that! 