Buying House From 95 Year Old Grandfather-In-Law

[James Reeves]

I posted this on another forum, but figured I might get more feedback here. 

We (my wife, 2 kids, and I) have lived with and helped take care of my wife's 95 year old grandfather for the last 5 years. Recently (when we found out my wife was pregnant with #3), we told him that we needed more space and were going to have to move and buy a house. Instead, he wants to move to a retirement home and sell us his house. We're open to this idea. This 1970s house needs a ton of work, but is obviously livable. It is plenty big if we have the whole thing to ourselves. Not having to move is an added benefit.

Now, here is where things get more complicated.

He wants to sell us the house for $200K which seems low based on raw SF numbers and such, but close to FMV considering the condition and amount of repairs & updating there is to do.

• What do we need to do before buying the home from him to ensure it is a good price and worth it for us? Inspection? Appraisal?
• Anything in particular to look out for when buying an older home?
• Any other suggestions?

My second set of questions has to do with the actual transaction. Assuming the $200K price is fair, he wants us to pay $100K to him and have the other $100K be a (wife's inheritance) gift. We have $50K saved up in cash for a down payment and can comfortably pay him the remaining $50K balance in 4+ years.

• How would we handle this to make everything official?
• Will this make a difference on our taxes?
• What are the pros and cons of not having an actual mortgage?

We both would like to keep the sale simple and keep realtors, loan officers, attorneys, etc. at a minimum (if possible). It's definitely a unique situation and I'm just trying to make sure I look at all aspects of the deal and don't overlook something important. Am I missing anything? Thanks in advance!