Using family money - are there agreements in place?

[Miles Stanley]

Hello,

I have a deal lined up and a family member has agreed lend me the full purchase price, interest only, for about 2 years while i make repairs and position the property for resale.

I don't object to using their cash, but my question is how does this need to get handled legally and/or on paper?  I'm on the verge of writing my offer (or my agent will rather), and the deal is cash only.  

How does the private money get factored in at closing?

Is this just a verbal or napkin agreement i make with the family member and it just gets done (surely not), or is this something that gets lawyer-ed to death and recorded in the public records?  

Do they just cut me a check for the purchase price?  

How does the tax man look at this transaction?

I love the appeal of OPM, but i tend to get hung up on the paperwork aspect of things.

Thanks,