you should check with Mark Robinson he makes some good post on the subject I think the equity deals have been hit and misswhen you say criteria .. i assume this is your wish list of what kind of returns you would like to get to consider real estate at all

I'd like to get more input on the subject and share some ideas.

@Daniel Y. the escalator clause is written:  "Buyer's offer price is $2,000 above the highest other offer submitted on the subject property, with a maximum offer price of $180,000."

If I get interest in a contract I'm negotiating seller financing the amount owed on the mortgage subject to with no money down.

This way you have documented the event.There is an incredible story by Will Barnard who speaks of his 5-6 year experience when he purchased subject-to from an owner who had apparently had a relationship with someone who also lived in the property. 

BiggerPOcket has a book for sal "Tax Strategies for the Savvy real estate investor" with chapters on this subject

There is very little other reason to subject yourselves to having to deal with tenants.

Where is the subject property located?

If they wouldn't be subject to a gift tax, could they just sell it and then write me a check for $85,000?

true, but your asking for objective data to answer a subjective question.