Rule of thumb when buying a bike to be (1) a rider; (2) a project to work on and make a rider out of it; (3) a parts bike
(1) buying a rider: if you can't make it run, keep looking unless the seller will take way below, WAY below, the market value for the bike in *running* condition
(2) buying a project to make a rider: negotiate down as much as possible because you know you will be putting $$ into it
(3) buying a parts bike: the cheaper you can get it the better because you're only needing SOME of the parts and it's not clear (unless it's a sandcast) how much you can get from parting the stuff you don't need
It sounds like you're buying a rider. I 100% agree with the 'offer him $500'.
However, if you size the guy up and he says something like 'wife says the bike goes or I go' then -- well you know what to do. People in that situation like me when I gave away a low-mileage Kaw 550 Zephyr, 4700 miles garage queen, gave it to a buddy from my Church because it was not loved and I needed it gone like now. Only room in the garage for one bike.