Purchasing a home from a family member

[Brett Hannon]

Hey BP! 

    I am looking to purchase a house I have been renting/house hacking from a family member.  The house was in very rough shape so I renovated it prior to moving in seven years ago.  Through the last seven years I have significantly increased the value of the home by adding a small addition, 400 sq. ft. cedar deck, large garage etc.. 

  I have a verbal agreement to purchase the property for $140,000 and estimate the conservative current market value to be around $240,000.   My question to BP is can I use the equity in the house to reduce/eliminate the down payment for the mortgage?  The seller is willing to assist me in any way.  Also, what is the most cost effective way to transfer the property.  

Thanks in advance