996-CAB

If the law in CA is that you can't sell a non-smog compliant car, and you can't buy it from the dealer even if you live in another state, then that ends it. But if not, something doesn't seem right. A secondary air pump failure is easy to determine and if needed, a replacement is a cheap AND easy repair. If the pump isn't the issue, there is a check valve behind the alternator that fails in the closed position and that is also easy to diagnose, but harder to replace because you have to remove the alternator. In any case it is easy to diagnose, if you know the car. And if you do, the parts and labor would be <$2K.
If it is clogged secondary air injection ports as noted by Porschetech3, his solution would, also, be easy to diagnose and remediate. I agree with him that the technician may be in over his head. The check valve and shutoff valves have been replaced with a superseded part that combines the two, and so it just becomes a headache for the Merc tech.

Geoff.T

They're going to send that thing to auction and get their money back out of it. I'd move on.

circuit.heart

CA law is that the seller must smog the car before it can be legally sold. As a private seller you can sometimes get away with "buyer smogs" but legally speaking the buyer can screw the seller if this occurs. An intelligent dealership would never attempt it.

hardtailer

@OP point the Merc dealer's tech to this thread and he can have this car pass smog. After that you can buy it.

JohnCA58

You can sell a car in CA without smog but must tell buyer the car is being sold as is and can't pass smog in CA. rather than tell, I would put in the contract.