Hello. Cars may be a little higher out there, but I think $5800 is steep, for a car with unknown engine noise.
I have found a few around here (86-88 560SEL) in the $3500-$5000 range. I am actually considering a 86 560SEL for $3500 that looks as good as the one you car considering, but I am still unsure about the running conditons of it. I missed out on a 122K mile, 86 560SEL in excellent condition for $3900.
I would have that engine noise checked out by a MB mechanic before I would pay $5800 for it. That could be a high $$$ repair.
Otherwise- it looks like a very nice car.
You said KBB private party value is $5300. A good general rule of thumb is to never pay over private party value for a car.
If you like it- offer him $5000 for it.
1993 Mercedes 400SEL 4dr
2012 Honda Civic LX 4dr
1972 Chevrolet Caprice Kingswood Estate 9-passenger wagon
1973 Pontiac Grand Ville 4-dr hardtop sedan
1988 Mercedes 300SEL (was mine, now mothers)