Tax question on selling principal residence

[Paul Clements]

Hello,

I've lived in a home for 20 years (it's a 50 year old, 1200 sq ft modular home that has very dated decor, drop ceiling, and in fair condition) and it's currently listed for sale. It's paid off. I have an offer from the state to buy the land for conservation purposes for $220k, but I have to demolish the house and 3 large garages, several small sheds in disrepair, remove septic system, well, foundation of house etc. Two of the barns are cinderblock one is wood. I also have a 16 panel solar array that's 5 years old that I could sell for maybe $5k with inverter batteries etc. I could also potentially sell off the modular home and a buyer could transport it elsewhere. Not sure how much I could get for it, maybe $30k. So at that point I'm at about $255k. Then I'd probably have to pay about $30k to clear the land of all buildings and debris. So I'm back down to $225k. A lot of these are ballpark, offhand estimates and I have yet to verify them.

I also have an offer to buy the property as is for $170k. This is way lower than the asking price, but the highest offer after 2 years on the market. The reason the asking price is where it is for the home condition is because it's a 20 acre lot, some of which is wetlands but has several acres of good land, and it's in a fairly good location. If I sell (and move off property) or demolish the modular home and sell the land to state, can I claim the sale proceeds as principal residence since I lived on the land? or does the sale/demolition nullify that and turn it into a land sale, in which case the $225k may end up being less than the $170k sale of land with the home, which would be tax-free. 

I know this is a pretty unusual scenario, but any help is appreciated.