if he has $4k in mods he no longer has a warranty. or it at least the powertrain and suspension parts of the warranty no longer apply, and those are the important parts.
if i were buying a car with aftermarket parts (though honestly i never would, not for a DD anyways) i'd take their actual value and cut it at least in half if not more. also labor does not factor in at all so it should just be the value of the parts themselves. if the previous owner was too stupid to put the parts on himself then sucks for him. many times i've seen cars with aftermarket parts be listed for less than if they were stock. so if a fair price for a stock MS3 in similar condition in your area is $17k i think that one might be worth $18k and only that much because you know the guy selling it.
though i have to say you are the ideal buyer for a modified import so maybe it's worth more to you. out of curiosity why is your friend selling?