They must have owned it for some time, because they have equity and are going to have to pay income taxes.
But if they've owned it that long, they would be taxed as Capital gains. But if they are buying another House with the profit, there won't be any taxes. (This is just thinking out loud, and I may be wrong.)
Ok, I think I've got it: And there are so many RED FLAGS on this, why would you want to continue?
And you do not have Realtors involved to protect your interests.
This is fraught with danger.
Good luck and may God bless
What he wants to do --- "pay the difference on the side" --- is intent to defraud.
Bad news all around.