It is kind of a crappy attitude, but I can understand why it is his policy. There are an awful lot of people who use the brick and mortar stores as their source for auditioning equipment, when the entire time they are planning on buying their equipment used on Audiogon or Audio Asylum (or where ever they like to buy used and/or demo equipment). Doing so is just plain wrong in my book, as it does indeed "waste his time", as you write, (and wear out his equipment as well).
However, for the $500 deposit, he should allow the client to audition the equipment in their home, since he now has an almost assured sale.
However, for the $500 deposit, he should allow the client to audition the equipment in their home, since he now has an almost assured sale.