Maybe he was the original owner or had it for a long time and suddenly just needed some cash FAST. If he were a flipper I find it hard to believe he paid $50 or less for it and is making much money on it -unless someone gave it to him or he works as a clean-out guy for home foreclosures (I actually met a guy like this who lives North of Chicago who picks up a TON of free old bikes this way and then flips them on CL)
The fact that he's willing to sell so cheap is a warning sign.
The fact that he flat-out lied to you about having the seatpost out by the LBS is a warning sign (if it were out he wouldn't have jammed it back in -seems like he tried to get it out, or someone tried to get it out, and failed.)
The fact that he was willing to drop down from $300 to $50 is warning sign.
Everything here smells fishy to me. Then again, I'm extra-allergic to stolen property.