Unless the guy provides proof of the rebuild, an itemized list of what was done to the block, and a phone number of the builder, $500 is too much. Also make sure that the block was adequately sealed up. No holes that critters can crawl into, including insects that make homes/hives. Without documented proof, consider the block to be a core, that's it.
As Matt wrote above, I paid $200 for mine, with no written proof. We did pull the valve covers and the plugs before I bought it and you could tell from the condition of the cast iron that the heads had been hot tanked, the rockers cleaned up, and you could see the new aluminum pistons through the spark plug holes. The crank rotated fine. This is about all we were able to do in the in the guys garage. I figured for $200, I'll roll the dice.
I got it home and started to tear it down because there was just no way I was going to try to start it without at least checking it over. The engine was rebuilt, as it had a variety of new parts in it, but the engine assembly was just plain awful. The engine was stored without a distributor in it so some mice crawled in through the hole and made a nice home in the lifter gallery. (boy were they surprised!) the cylinder walls were lightly rusted due to condensation getting in through the valves, the pistons were new, but poorly fitted, the block did not appear to have been properly hot tanked (all the plugs were not removed), the rings were not gapped correctly, etc. The only thing done correctly was the machining on the crank. Everything dialed in there perfect. So I had to redo nearly everything. So I figured it to be a core, and I was right. I got lucky in one way, I had to bore it out .060, so I have the nice set of new .040 pistons and rings that came out of it for another build.
Frankly, I wouldn't trust a rebuild done by anyone else farther than I could throw it. Read the other post about mr. Potter for some insight there. Most engine rebuilds are done quite poorly be people whose only interest is getting your money and hoping the engine lasts long enough out of warranty (if it even comes with one.)