What you are looking for as far as condition is wear. Wear in the ways. Wear in the bearings. excessive backlash in the controls. Undue noises, remembering that straight cut spur gears are noisy. Clean is not necessarily good. As the restoration guide opines, an oily lathe is an oiled lathe.
As far as equipment to look for. This is not a toolroom lathe, so it likely will not have a collet setup or a built in chip pan. It may have a taper attachment. Depending on the year, it will either be a single tumbler or double tumbler transmission. The later double tumbler is easier to use and considered stronger. Chucks. You'll want both a 3 and a 4 jaw. It's nice to have a small and a large, also. Tooling; tool post, holders, bits, etc. are expensive to equip. Getting a large assortment to start with is a big plus. A quick change tool post by itself is $200 for chinese, and you don't want to know what the 'merican version runs. Boring bars, threading tools. Center rest. etc. A properly equipped lathe at $2K easily beats a lathe with no accessories at less than $1K.
This class of lathe is always three phase power. Unless you have a commercial building, you will need a phase converter. Again, a bit over $100 for an ebay'd Chinese VFD (what I run) to $500 and up for a new rotary phase converter or top shelf VFD.
If you are serious about the machine, the Ilion restoration guide sold on ebay is well worth the money as both a buyers guide and a care and repair manual.
Oh, and if it comes with a stack of spare gears, one of which is 127 tooth.... we need to talk.
Here is a sales brochure.
http://vintagemachinery.org/pubs/1617/16554.pdf