How bad is this?
 

Was sold this motor as 'running with excellent compression' and despite due-diligence before leaving with it I found this after spinning it at home getting ready to install
- trying to determine if I should ditch it or tear-down and inspect further

Looks like oil which would be normal if the engine was stored . I do the same thing when storing engines for longer periods of time. Keeps the inside from rusting and seizing.

Why is it green with white junk in it - isnt that indicative of a coolant leak into the rotor housing?

Why is just the rear housing full of that crud and not the front?

Don't know why it's green in the picture it looks like it's just dirty aerated oil . If you only have it in one of the housings you may have a problem. You can do a leak down test and see if it leaks. Or if you have enough of the oil in there you can poor it into a jar and see if it separates .

There is at least 1/2 to 1 cup of oil in the rear housing (maybe more) - Ill see if I can flip the motor on its side and drain it out.

Did the guy give you any history on the engine other then the "it was running before it was pull"??? Also what kinda of engine is it?

Assuming that you paid good money for the engine and the expectation is that is it a good running engine then you have several avenues if it isn't in good working order.

I am not a lawyer nor do I live in your state but I have dealt with similar scenario's in the past. The short of the long is that you paid money based upon the expectation that it worked which was reinforced by the seller. If it doesn't work or there are other indications of fraud you can take him to court and win. It will take time and navigating the paperwork can be a real PITA but if you have significant amount of money in it I assume it'll be worth it.

As others have said, at least a compression test although a leak down would be great and go from there.

looks like oil mixed with coolant, kind of?

he could have also put oil in the chamber to make good compression for you just in case you asked...

why didn't you check inside the motor before you paid for it? This doesn't sound like due-diligence to me

Ive never done anything with rotaries before. I did pull the dipstick and inspect as much as possible before i bought it - obviously not enough tho!

I believe this is either an 85 with 86 EFI or a 90's

Why not clean it up cross your fingers and try running the engine. Who really knows how the oil got there? At the worst you might be out a couple hours of labor .You can open the engine up and investigate what's going on in there if anything. I wouldn't bother taking any legal action will just end up costing you more time and money. It will become a case of he said she said and the judge will ultimately choose in the sellers favor since just about anything sold without a written contract or warranty falls under buyer beware .



The engine pictured appears to be a S5 but can also be made up of different parts can you post several more pictures from different angles?

I was gonna say s4 cause i couldn't see knock sensor holes, but with the paint and lighting its hard to say

You are correct no knock sensor hole . Definetly s4 with s5 front cover and omp. Look like someone removed the exhaust sleeve too. And I wonder why the exhaust flange is still attached with the tubing cut off? We definitely need more pictures.