As mentioned, possibly you could get more for your money. However like you say, there's the hassle factor that by saving £500 you're driving all over the Countryside, which may or may not pay off. Plus if something does go wrong with this Bravo you're only a mile down the road from the garage.
The guy seems reasonable by offering to swap (many garages seem obsessed with making someone pay something for a new car even if the one they're trading in is worth more, so fair play to him on that). Plus if you get the exhaust 'disclaimer' in writing and a bit of cash towards the steering wheel then bonus, though like people have said, Fiat/Alfa exhausts go scabby like that on the outside but usually go through years of MOTs with advisories before they actually rot through.
I was actually gonna say 'walk away' when I saw the 3 owners, but if it's an ex Fiat car then only 6-12 months would've been them, then the remaining owners would've kept it a fair while, so should be ok. If the number plate starts WM, WN, WP, WR then that'll help back up the ex-Fiat ownership - these are the most commonly used prefixes for the Bristol area, where one of Fiats main import centres are, so a lot of ex-Fiat Group cars have reg's starting with these letters.