Remember that the last year for the XT500 was 1981, making the engine at least 33 years old. As Mick25 has said $500 is a fair price, but you will find that they often go for a hell of a lot more than that.
"Running" as a description does not necessarily mean the engine is a good one as these engine will stand a whole lot of abuse and will still run when that are totally knackered.
CJ