A title company will do a search and be sure your relative has clear title and that it transfers cleanly to you.  

If you are funding property for your relatives I would put the loan in their name and be on the deed 100%.

Unsaid in your post is how you or anyone else would handle the unpermitted ADU and bedroom.You decide not to buy the place...does this alienate you from your relatives?

When does your relative want his investment back (5 years, 10, 30?)?

It's going to be a hassle, especially if this guy does not go quietly.I know it doesn't help you with this situation, but hopefully there is a lesson to be learned by your relative and her landlord about allowing someone to move into a renal unit without a proper contract.

If your relative has assets you would sell those and then pay off the debt with the assets, because doing so you get whatever value remains.

You can subject to on your relatives property under an LLC and do a lease to own exit strategy with the tenant.

Hi Adrian,Well, lets say you owned one of those old flintlock rifles, and you went out in your backyard and tossed a yellow wrapped McDonald's Cheeseburger on the ground and started shooting at it.Then after a couple of shots, this dark sulpher smelling liquid started bubbling up (That would be Crude Oil--what they make gasoline out of).Crude Oil is a mineral (along with Diamonds, and Rubys, etc...)If you owned the mineral rights, you might become instantly rich, and your relatives might recommend that you move to California...possibly to Beverly Hills.

And they are selling you the house so you can re-sell it and make a profit on it, or are they selling you the house so you and Mrs. can have a nicer summer home (an improved life).Because if it's #2 and you turn around and sell it...you probably won't be getting a birthday gift from them ever again.Seem's like taking advantage of your relatives niceness, if they don't expect you to sell it.If you tell them you intend to re-sell it does their price change?

Your relative will place the lien on the home, should anything go sideways, they can foreclose to secure their money.