A running 8n just by itself is worth $1000+ even if it needs some work.
Seriously, if the guy is asking $1500 for it, it is insulting to offer $500. At least that is MY opinion.
If I was asking $1500 for something I was selling, and some clown offered me $500, I'd tell him to get lost. Even if I was willing to negotiate a bit, after an insulting offer like that, I wouldn't take a penny less than asking price.
You may start off a conversation with the guy and ask a question like "are you firm on that price" or "what is the best you can do". See what he says and go from there. But in all seriousness, with the loader and backhoe, he could probabally take it to the junk yard for scrap metal and get $500 out of it. So if you feel scrap price is all a running 8n is worth, by all means offer $500. Just dont be too suprised if the guy tells you to get lost.