I would be weary. I think his asking price is much too high for an 86 model. I have an 86 420SEL and know quite a bit about these W126 cars. My first impression believes me to think that this may not even be a 560SEL. All 560SEL's had rear heated and power seats to my knowledge. Does it have zebrano (lighter with lines through it)wood or burl wood (darker). 560's should have burl. Does the air cleaner intake have two intake hoses coming off it or one? should have two. Does it has a resevoir tank for hadraulic fluid under the hood on the drivers side (near ABS pump). It should have that as well.
If I were in your shoes, I would search for a 89-91 model. Reason being is that they have the upgraded interior and stereo. It is much nicer. And I bet you can find one in your price range, just have to look hard.
As far as the transmission, my first thought would be the cable going from the throttle linkages to the tranny, but if from a dead stop it will go to redline when floored, may mean its working fine. It still could be out of adjustment. It might be something in the valve body that is stuck or gummed up (read: $$$). I had to rebuild my tranny at 150,000 and cost about $1,200 just for parts. I did most of the work myself. The 2-3 shift is notorious for wearing out.
The rust could be another bad thing. Since its already visible on the fender, it might also be present under the plastic thats on the doors. Another bad place for rust is on the rear wheel arches.
The airconditioning could add up to the cost of a small japanese econobox, so beware. If its not working now, chances are there is something more wrong with it than just the "need to add freon". Might need a condensor (common cause) or compressor, etc. Like someone else on this board once said, if the A/C does not work on a benz your looking at, instantly subtract 2500-3000 off the price. Ever so true!
Lastly, I would definetely replace the timing chain if its never been done before. This can also run into money if upon inspection some rails are broken. That is the #1 cause of engine failure on these engines.
Sorry this is so long, but I hope it helps in your decision. You can run the VIN and see if it is in fact a 560SEL. Maybe it could be a grey market or special order without those options?? I dont know to be honest.
93 300D 2.5 Turbo, Black/Palomino 273K
09 E350 Black/Black 41K