Bicycle Blue Book says it was a $900 bike so at that price the bike should be in very good condition. Where as the rust may be superficial it tells me that someone wasn't taking care of their bike. Without seeing photos of it or in real life, the price is on the high side if you follow the BBB value system. BBB is a controversial subject around here but it does give you a ballpark value. $250 off for a bike that is three years old might not be the best deal. A new bike comes with a warranty, and you pay slightly more.
The most important thing is fit. Make sure any bike you plan to purchase is the correct size.