Good offer for a young family? Buy yes or no

You want to have the house, I read and understand that. If it is equipped with photovoltaics etc. and the rooms are in as good condition as you say, then the bathroom is probably more a matter of taste, maybe. It might just be your weird taste, maybe we will see pictures sometime. If someone is currently sitting in the bathtub you can just paint over that.
As you read in many ways, it is "tight" but I also think that you can do well with this money. It is then a decision and you have to know that this stands "for a lifetime," unless money rains down someday.
I had no problem driving old clunkers around or not having a car if necessary, doing vacations differently from the masses and gladly being at home because it is nice there. You can also pass something like that on to your children, which I consider useful nowadays anyway. Everything has its price – for a nice home I have always been willing to give up other things.
But it’s best if you don’t read so much here anymore so that you don’t get too many remodeling ideas. The heating is running, the bathroom works. Look for affordable/imaginative alternatives to redesign your bathroom, that can even be fun to implement things with little money rather than stumbling through the bathroom studio. In such a case you can also become a free handyman yourself.
Better to have a buffer in case the heating or something else complains.
With your acquaintances, I would also speak very openly and clearly about what you have to pay them. If they are buddies and do it for free and you help out then you might as well do it right away. If you have to pay them somewhat, I wouldn’t do it and would wait.

What is your wife’s profession and when does she want to start working again? And with how much? €700 net really isn’t much, especially in Bavaria. Isn’t there a possibility to start again earlier and at a higher amount? Otherwise, it would be too tight for me. The offer seems good, and with new silicone, fittings, and a thorough scrubbing, etc., you can spruce up a bathroom with little money. Renovating a 20-year-old bathroom is nonsense, especially if money is tight, and the heating system can easily last another 10, 20 years or longer.

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I think you should buy the house/property under these conditions. If you ever regret the decision, you can always sell it, but if you don't buy it now, you will regret it "forever." From what I know about the situation around Munich, you really won't get a second chance. However, I agree with my predecessors and would postpone the bathroom renovation to "later." It can't be that bad from the year 2000. If the tiles bother you, stick self-adhesive tiles in a color you like on top; I did that in my last bathroom as well. Add accessories, plants, etc. You will get used to it, and if necessary, you can still change it in 2-3 years.

yes, it would be tight. But it’s allowed to be, that’s why we have a house that we want... So those are sacrifices that could be made.

I don’t even think you have to make such big sacrifices for it. In the first years you will enjoy the house so much, design it, furnish it, rearrange it, tinker around with it, that you won’t miss much else. And it will be fun for you, a hobby, so to speak. And with the two children, you’re not constantly out and about in Munich city life anyway, etc. I repeat: I think it’s great if you buy.

Say it like this. You can pay for it or finance it. If it gets tight later, then it just gets tight and you knew it. The only thing that can happen is probably that you have to restrict yourselves or can't live as extravagantly as some others do; whether that should be desirable is questionable anyway. You can't go under, you simply can't buy some things then. When the money is gone, it is gone. But you can still live well with the remaining money.

I don't even think you have to make such big sacrifices for it. In the first few years, you will enjoy the house so much, design it, move things in, rearrange, tinker around, that you won't miss much else. And it will be fun for you, a hobby of sorts. And with the two children, you aren't constantly out and about in Munich city life anyway, etc.. I repeat: I think it's great if you buy.

Moving in and tinkering around regularly costs money with your own house.