Buying iPhone 4 from Craigslist.. Question about unlock and precautions!

Hello, I'm new here and I'm about to get my first Apple device (Woo ho!)
I'm going to buy brand new iPhone 4 iOS 4.2.1 from someone via Craigslist and he said it has iOS 4.2.1 that's going to sell me one for $500 (16GB). Is this reasonable? My phone is broken now so I need one soon.
Would I be able to unlock it to T-Mobile US and use their 3G/4G service?
What are some things to check when I buy phones via Craigslist? It's my first Apple device and I'm not sure what to check. Should I bring my laptop and install iTunes before wards to see it works? Since it's not unlocked, I cannot check to make sure the phone works right?
It's a lot of money so I want to make sure everything works fine. Thanks!

A Piece of advice... DON'T do it!
You don't know what you're getting. Whether it has problems, is stolen, etc. In addition, ALL U.S. phones are locked to AT&T and can not be unlocked legitimately.
IF you manage to hack it and put it on the T-mobile network, you need to know that it is NOT compatible with the T-Mobile 3G network in the U.S. You will get Edge speeds at best. Also, there are reported problems with other features, face time, visual voice mail, etc. not working on T-Mobile.
Is there some real reason why you can't just use AT&T, or starting 2/10, Verizon?
A brand new iPhone 4 with a warranty is only $199 on contract. You're going to have to buy voice and data service no matter who you get it from, so why not just bite the bullet and sign the 2 year agreement. Unless you can't get coverage from either one of those, in which case I'd question how you manage to get T-mobile coverage either...
This all assuming you're in the U.S. since you don't specify.
If you're in another country, there are legitimate sources for unlocked phones.

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