I sure don't think you should pay too much for the car, but as someone who has invested quite a bit of money into cars myself, it's good to be fair regarding what that owner has just spend on their 735.
Kelley Blue Book private party value is $3,400 good condition and $3,850 excellent condition for the car in question. If you look on Autotrader.com, you should see that most 735i's and 735iL's are selling in that range--these being mostly medium to high mileage cars in passable condition. Most of the ones listed for $5-6K plus are pristine, extremely low-mileage examples--and are probably worth the extra money.
Given that the new transmission was surely expensive and the new tires and brakes are a bonus, I would pay an extra $500-$800 for the car, perhaps. If the car is truly immaculate inside and out, maybe I'd offer $4,500. If it is average, I'd go no higher than about $4,000. And if it's got quite a bit of wear, maybe $3,500-3,800. If you get the car at an appropriate price, I'd say you both will have gotten a fair deal. As long as the engine has been properly maintained, I doubt it will be an issue until 250K, possibly even farther down the road. With a new transmission, I don't see what else MAJOR could go wrong.