Is it a stick or automatic? '85 was the only year you could get a stick shift TD in a wagon. They are hard to find. If you got one then you scored. Well, even if it's an automatic you scored anyway cause it's a diesel Volvo...
$1200 is a good price -- if the extra injection pump you got with it is in working shape then it was worth almost that much alone. Just make sure the timing belt is not about to break, run good oil and filters, don't overheat it, and keep the rust under control and it will probably be a sweet ride for a good while longer.