For that price the bike should be in good shape. Any deficiencies in brakes, tires, cables, should warrant a discount.

• The tires should be flexible not brittle, hard, or cracked.
• The brake pads -ditto- and shouldn't be worn down
• The cables, diitto
• Are the tires marked with 27" or 700? Are the valves like car valves or skinny. I sell 27" wheeled bikes with schrader (car) valves $20 - $50 cheaper than the 700c
• Do the magnet check on the rims -- non magnetic - or Aluminum alloy - is better
• Spin the wheels , any wobbling should be minor and not cause the rims to rub hard against the brakes.
• Hold the back wheel off the ground and turn the crank to make sure the chain is running smooth against one of the back gears. You may have to adjust the front right shift lever. Put the rear wheel back on the pavement. Spin the crank backwards. In a well tuned/lubed bike the rear deraileur (pullys) and chain should move smoothly.
• Grip both sides of the crank arms (or pedals) and wiggle them perpendicular from the plane of rotation. It should be firm and not move. The cransks should rotate smoothly.
• Hold the back wheel off the ground. Give the pedal a good crank and feel how the back wheel spins. It should spin smoothly without too much up/down shaking of the bike
• Push the bike forward while holding the front, then the rear brakes closed. It should resist strongly.
• Check for loose spokes or cracks in rim near spoke nipples
• Straddle the front wheel while standing facing the handlbars. Use your legs/knees to lock the wheel. Wiggle the handlebars - make sure the don't have any play.
• RIDE THE BIKE - look for smooth operation, no odd noises, etc. Make them adjust the saddle if needed.