Plz help Newbie! Buying 97 mods, *blown hg! *what to pay?

Hi my name's John, this is my first post. I'll hopefully be introducing myself soon with a new to me 4runner. Hopefully I put this in the correct forum area.
Seller:
Seller posted for $3800, seller seems to know these trucks very well. He's fixed, built and flipped a few. This was his personal rig he says, but he also said he only drove it like 50 miles over like 3 years...?( I don't believe that really). He drove it like he stole it on the test drive!! I drove it too don't worry, but dude was flying thru resident street 60-65mph and 40 over dips and speed bumps lol so he must have been very confident in it. But everything he told me and showed me seems to add up very well. He has lots of pics dating back years in his cell phone he showed me many. I looked at the dates as he scrolled thru the phone. I was with the guy for 2 hours looking it over and talking.
Truck:
Engine has BLOWN HEAD GASKET
So I'm buying a 97 with: 277k miles, 5sp manual trans, factory elocker( I will test it before I leave with it), lifted with fabtech front coilovers I don't know the rear, new polyurethane bushings on sway bars, rebuilt power steering rack, new brakes all around, new rear axle bearing and axle seals, nib cat back exhaust ( stock I'm guessing), 4.30 ratio rear diff from an automatic installed(front diff is still the 4.11s), comes with the 4.30 front diff to install( I'll count the turns before I leave to verify if possible), reupholstered leather front seats, larger tires and aftermarket wheels, and a decently clean body, very little surface rust on frame and body. Ac works, all power systems and accessories seems to work.
SELLER posted for $3800
Engine in town at YodaYard in Denver is $1200 without returning a core. I might keep old for a builder. I want to use this for a daily and soon. So I'll buy another engine as opposed to fixing the gaskets for now. I know there is allot here and it definitely looks well kept. What would y'all say it's worth? I'm having thoughts of starting at $3k and going up to $3500 and still feeling like I scored out alright.
He mentioned if I offer too little he's keeping the seats for another truck. I want them they match the rest of the interior. Yoda Yard here in Denver quotes $150 per seat in good shape for leather seats, currently out of stock
So if I pay asking price I'm in the truck for $5000 without labor for the engine and diff swap. I gotta use the 4x4 this winter obviously can't do that with mismatch diff ratios..
Recap of questions.
Can I test and engage the elocker in 2wd? (I couldn't hear it actuate but the red light was flashing in the dash cluster)
What's the truck worth after I'm done?
What would you pay?

 

Welcome to the forum.

 

Yes the locker should work in 2wd. I would pay 1500-2000 tops for it. I payed 3500 for my 98 5 speed with 120k on it. Blown HG's aren't very common on the 3.4's. I would avoid this truck.

 

Yeah, $3800 is way too high for a rig with a bad engine. You'll have more like $7k into it before she's back on the road. I would tell him $2500 and don't touch the damn seats.

 

Problem is you don't know what else is bad. Tranny for all you know could be bad. I would avoid it especially at that price.

 

That seems like way way too much money considering the condition of the vehicle and then the head gasket. The elocker is nice, but it might be better to get a regular 5 speed 4x4 model in good condition and swap axles on it, rather than get a car that is rough all around and needs a new HG.