I just bought a 302 for $450 guy said it was running and pulled because he could not pass smog, after bringing it home that night I found out there was no compression in cylinder #6 he said come back down and he would give me another engine. So i did that and am happy with the new engine.
For the money he paid, I think he should be expecting a running engine. But if you did not say it was running I guess he was just buying a block with some issues it sounds kinda of high price.
You can always say I lived up to my part of the deal, but if you believe in karma, you should take back the block, after all what are you out?

 

It is just not that hard to take a hot battery with you and do a compression test, I buy used outboards all the time and fix and resell them, I would not leave my house with out a hot battery and compression gauge and spark gap tester. . i pay for what I can prove and assume everything else needs repair. With all the battery powered tools now a days I think an oil pan could be pulled in about 2 mins..So if your buying used engines off the ground do a little checking first. this is on the buyer. the rule of thumb would be it is up to the buyer to determine what he will pay. and a engine that is laying on a pallet is not going to have the same value as the exact same engine in a car and can test drive. But I try to always be honest but the fact is there is nothing like a test drive to add value to a motor.