He may be right on a lot of your points. If it ran w/o freon for a long time it can overheat the compressor and damage it. Also depends on how many running hours the unit has. A 12 yr old car with 200,000 miles on it is a lot worse than a 12 yr old with 50,000 miles on it. In your climate it may be 1/2 to 3/4 worn out and may be better to replace it. His price sounds too low to me or he is giving you a real good deal. A basic heatpump where I am will be $4500 to $5000. If you plan to stay in the house for more than 2 yrs I would lean towards a new unit.