What does your lawyer say? I mean, the house is worth what someone is willing to pay, and you don't know that number until you sell. Is your name on the deed/mortgage? If so, you have to sign - so if someone offers below market value, you negotiate at that time. You don't have to accept any offer that is below your asking price. Insist on asking $220,000. I mean, you have to start somewhere on pricing a house.
It's all a negotiation. I suppose you could insist on half of the proceeds from a sale price of $220K, but you might never get that and it will drag this out longer. At the most (with the numbers you've given) it would cost you about $25,000 if it does sell at his low-ball $175K. Then there are Realtor fees... so $30,000 worst case scenario. You'll spend that much in attorney fees if you keep going back and forth. I would think he would want the most $$$ out of this, too.