Water vapor...
 

I'm thinking about buying an 88 7 I looked at yesterday. Its only got 130,000 km on it (85,000 miles) and overall its in good shape. The only thing I'm worried about is after it had idled for a couple minutes water droplets were forming in the tailpipe. I took it out for a tire-screetching lane-weaving test drive and when I got back the tailpipe was bone dry. Is this water (condensation?) normal or should I just forget this one?

Probably normal. Just condensation like any other car. What you should look for is pop the radiator overflow and watch for bubbles in that. If you see that i would leave it alone.

Water is a product of combustion. Due to the temps involved it normally stays in gaseous form (steam), so you can't see it. When the car’s cold, the cold exhaust pipe causes it to condense into water vapour and/or water droplets. Perfectly normal. :D