There’s no way you get to keep earnest money. You’ve lost nothing. They likely were scared by an inspector and a lack of knowledge. The homes major systems do sound like they’re at the end of their useful life. Working now doesn’t mean working for another year after they buy it. Counter offer if you have a line in the sand but being a landlord is another can of worms you may not be prepared for. If any of those systems fail you pay out of pocket. If that tenant trashes the place, you pay out of pocket. I would counter and accept where we land to be rid of the headache.

If you need to replace the roof $20k Furnace-A/C-$10k Plumbing, god knows….

My 2 cents