I would definately check for head gasket leak and evaporator leak. Those are two of the more expensive items to have fixed if you can not do it yourself. If the car has zero rust and I mean no rust on any suspension or chassis member it can be essentially restored. If the car has R12 and it has bubbles in sight glass I'd check the center vent temp and see how cold it gets. Also check to see that no air comes out defrost vent went it should be coming out the cent and side vents.

Also does the tailgate stay up when opened?

You really need to have car checked out by someone who works on and is very familiar with 124s.

I have a 92 TE and I worked on it for about 6 monts before I got it just the way I want it. Wagons are more expensive to maintain because more things can go wrong.