Found off market deal with working with realtor. How to proceed?

[Taylor Robertson]

I've been working with an agent for a couple months now in hopes of finding my second deal. He was previously my teacher in high school, so I've had a relationship with him and I've signed a buyer's agreement with him. About a month ago a family member of mine let him know that he was going to sell his dad's house. He just wants to sell the house and use to $ to help his father with health issues, so he's willing to sell for under market value. It's worth about 175k, and he's willing to take 140k for it. The thing is he wants to sell it directly to me (FSBO) without the use of an agent to save on commissions. I'd told my agent this a few weeks ago, and my agent told me technically he is owed a 3% commission but he won't hold that against me since it's a family member and I'm starting out. I want to move forward with the purchase because it is a great deal on paper but I don't want to do my agent dirty either. I'd thought about offering 145k and allowing my agent to take a 3% comission ($4,200), use the $800 on any inspection/closing costs, and the seller walks away with 140k. That would mean the extra 5k would technically come out of my pocket, right?

Does this sound reasonable? I would be financing the property via a bank. Any thoughts would be appreciated! Thanks!