I just recently bought a 1988 wagon with 265K on it that is nearly perfect for $2700. It had two owners the first one being the original owner who took great care of it and the second being the owner of an independant Volvo shop. The second owner spent almost 7k in repairs and upgrades on the car. I would "wait it out" on the seller. Make a fair cash offer and give him your contact information. Not many people will be interested in a vehicle that needs major service and the problem may worsen and also make it more difficult for him to sell the car. You may get a phone call from the seller when he gets tired of the tire kickers.

Volvo sedans especially 240's don't fetch a lot of money here where I live. I drove a really nice 1993 Volvo 240 Sedan for $1,100 a few months ago. If it had been a wagon I would have bought it.