hmmm... i guess it depends on specifically what you want to do with it. you say you want to convert it, but are you planning on putting a lot of miles on it? will you be traveling frequently? 170k of mileage is not extreme but a little high. also keep in mind that this is a gas engine, so you have at most around 130,000 miles before it's going to need an extensive rehauling of the engine (and possible total replacement) as these kinds of engines rarely last past 300k without serious problems.
i like the size, it's kinda in the middle without being a full size bus (which can be a pain to drive sometimes). what's the gas mileage? i'm going to guess it's around 10/mpg.
bottom line is if you're patient, you can definitely find a better deal. the thing to keep in mind here is that it's a 1987, which is pretty old. i assume that's why he spent so much money getting it up to spec. also, $9,000 seems a little high for the things he listed fixing, and out of those listed, ignore everything except for the suspension, tires, and fuel pump the rest is just padding (things that he's listing to make it sound better than it is).
if it was me in your shoes... i'd pass. you can easily get a full size school bus for less, or you could get a really nice short bus for about the same price, and both of them would be about 10-15 years newer than this bus. for 5 grand, i wouldn't settle for anything older than a 1997.
also, i'd consider looking at diesel engines since they're made to last significantly longer (500,000+ miles) although your fuel costs will be higher, they tend to have better gas mileage since they're more fuel efficient, and if you want to do a veggie oil conversion at some point, you can do that too. also, stick to an automatic, driving stick on big vehicles in fucking scary in my opinion.
anyways, i hope that helps!