Re: 25 hp mercury tiller...what year is this?
Is this a fresh or salt water motor.
Markets can vary significantly in price. We would sell it running, tuned, for $750-$850 without much trouble.
Those were robust motors and made for plenty of years, so used parts shouldn't be a problem.
New compression on those were generally 125 as I believe they were chrome bores, so you want to see compression close to that - you're OK.
Are you able to do the carb? Kit will be ~$50 (does pump and carb).
What are your other options in the area? That's a very important question. Finding a reasonably priced used outboard with "good bones" can be time consuming. Is a 25, fairly ideal for your use?
Many guys on here tend to drive hard bargains, as it could be their 10th motor, or knowing how to do repairs, they wait for a cheap fixer-upper and enjoy the hunt... and there are other reasons.
What you have there appears to have good bones, but $500 would take some of the fun out of it. Depending on the above answers, $350-$400 gives you some room to work with from my view.
Hope that helps.