"Recently rebuilt" could mean he attempted some kind of repair on the trans to get the thing out of his hands. A recently rebuilt trans, if rebuilt by a reputable shop will look brand new.
The diagnosis of "a seal" is suspect. What you describe sounds like a loss in pressure so it won't hold 3rd gear. While this could be one of a variety of "seals", you'd need to remove the transmission to properly diagnose and repair it. I think you're looking at trouble unless he can produce a receipt for the repair or the rebuild.
BUT, if you're handy I wouldn't be afraid of swapping out a transmission in these old things. Everything is easy to get at, but I'd knock $1k off the asking price for the risk. I'd guess that you can find a good, used trans on CL for that much. Or, $1k would get you half way to a proper rebuild.