I'm going to go against the grain here I know, but actually that isn't a bad offer from your LGS....IF you had to sell it at the LGS. Yes the LGS will sell it for a profit...that's how they make a living, pay their overhead, feed their kids.
On that gun, the LGS will probably get a good price fairly quickly...but betting your livelyhood on such things will put you out of business fast. It's a gun to them, inventory to be marked up to make a profit.
I bought my P320 RX for $769, and I am sure the LGS made a decent profit...I would think he paid SIG ~$625 for it brand new and unmolested. $500 for a used, modified gun doesn't seem like he's treating you too bad.
I mention all of the above only to say the LGS isn't trying to rip you off...IMO.
All that said, I would sell it myself, and get closer to what the LGS would sell it for (~$700)...but you might have to sit on the inventory, while you are waiting for it to sell....that's the trade off.