Here are some quick but important checks you’ll want to make when first picking up any used guitar. This can be applied to instruments for sale in guitar stores, as well as pawnshops, estate sales and garage sales.
GENERAL CONDITION
1) Neck: is it straight (with sometimes just a little relief, as necessary)? Does the truss rod function? (Check relief—measure string clearance around the middle of the neck while holding down the low E string at both the first and final fret — and make a quick adjustment if necessary.) Do the frets have some life in them? The cost of a complete fret job is likely to nullify any “bargain” you think you’re getting, unless it’s a real steal on a desirable model. Are there any cracks or fissures at the headstock or body joint? If it’s a bolt-on neck, is there excessive side-to-side play that can’t be eliminated by tightening the mounting screws? (And, will the mounting screws tighten fully? Stripped screw holes are a major issue.) If it’s a set neck, are there any signs of a faulty joint: cracks, excessive finish checking around the heel, or strings that rise — or fall — drastically from the point of the neck joint to the bridge?

2) Body: check general stability of the wood, especially any cracks if it’s an acoustic, semi-acoustic or archtop in particular. Check for cracks around the jack or jack plate, one common point of stress. If the guitar has a removable pickguard, check under it to see if any wood has been routed in the past to add a non-standard pickup. On acoustic flat-tops, check for excessive “belly” (upward bulging) between the bridge and the end pin; note that some bellying is normal in many designs, but drastic bellying might be a sign of excessive string tension over a long period of time.

3) Finish: check for signs of original finish; this can be difficult, as there are many excellent refinishers out there, and even an expert can sometimes have difficulty detecting a good one, away from their tools and reference materials at least. Rule out the obvious or amateur refin, at least — and if it seems to have one, make sure the price has been reduced accordingly, especially if it’s a guitar with any vintage value at all.
4) Hardware: is it all stable and functional? Do the tuners work, without slipping? (Note that poor tuning stability is usually not the fault of the tuners, although a tuner that is genuinely loose or slipping is a problem). Is the bridge secure, with sturdy saddles and slots that are not too worn out? Does it all move smoothly for intonation and height adjustment? Are the nut slots in good condition, not over-worn, spaced correctly?
5) Electronics: are pickups working in all positions? Is there any serious intermittency in switches or pots? Minor scratchiness is pretty easy to clean out with a squirt of contact cleaner, but bigger issues like shorts or bad pots/switches might be more frustrating to repair, although they aren’t necessarily deal breakers if the price is right. Faulty or intermittent pickups, on the other hand, are usually a more expensive proposition — an easy $40 each plus installation costs, minimum, just for basic generic replacements.
PLAYABILITY
6) Action: is the action comfortable to play, and if not, can it be adjusted with a simple bridge adjustment and/or a half a turn of the truss rod either way? Usually
action, neck feel, string spacing, “feels right” both standing and sitting, no sharp edges on bridge or frets when you play.
7) Neck: does the neck profile and thickness feel good in your hand? Is the string spacing appropriate to your playing style?
8) Playing comfort: does it simply “feel good” played both sitting and standing? Are there any sharp edges on the bridge, frets, or nut that hurt when you move your hand across them to play?
TONE
9) Ahhh… tone. The most ethereal of considerations, but something you should try to assess logically, nevertheless. If an acoustic plays great, sounds great, and seems generally solid — and the price is right — that’s about all you need to know. If an electric feels great, but really doesn’t sound good to you (provided you’ve got a real amp to try it through, and not just the sizzle box you brought along to make sure the electronics function), you’ll have to assess whether you want to risk the expense of replacing pickups or tone-enhancing hardware on the “pig in a poke” venture of trying to improve it. This is a tough one — it’s your call.