Thinking of buying a spec d from a dealer. It's got full service history and lots of receipts for mods done. It's had engine work done to it. Dealer doesn't know what. Also no receipts of engine work or remap. Also there's oil residue in the water and a oil smell from one side of engine. Would you avoid

 

sounds brilliant

 

Are you seriously asking the question after all that?

Sounds like typical head gasket failure from the 2.5.

Erm yes, avoid. Unless he will knock it down by £3.5k to cover the rebuild.

 

Hawk Sti's have a reputation for HG and/or piston failure. For some reason Spec Ds (especially with PPP) seems even more prone although that's probabaly because I own one and look out for them more.
If it's had engine work it may be as a result of failure - if it's been forged and has uprated HG and studs then it could be a decent purchase. Even after a rebuild, the coolant bottle if often stained and could suggest HG failure even though it's been repaired.
Unless the dealer can give you confirmation of what work has been carried out I would proceed with caution. It would appear that many give out before 60k miles - although some are still going strong at over 100k. The Spec D is a great sleeper, so if everything else is spot on then you could just budget an additonal £2.5 - £3k for getting the engine forged.

P.S. When my HG went it failed over a long period of time of which most of this it ran absolutely fine with no real symptoms. Therefore, the car will probably drive fine but could still be failing.

I wish you luck either way.