In my opinion older vehicles like the W116s are sold cheap (less than $3K) for several reasons.
a) Registration is expired or not about to be renewed without some cost
b) High mileage which also gets reflected in overall condition
c) Lack of tender loving care over several years results in lots of non working components
When I bought my Milan Brown car many years ago, it required a huge amount of restorative work, but I chose the vehicle because the car was
1) Originally delivered through York Motors
2) Had full log books
3) Did not have any evidence of major collision damage (absolutely straight chassis)
It needed new shocks all round, timing chains, 24 light globes, muffler, new stereo and speakers and other lesser items.
Having completed the repairs and mechaincal work for around $3,500 I have had a reliable car that has cost less than $500 per year on average. Since then I have had Styria rebuild the gearbox ($2,500 or thereabouts), replaced the starter motor and alternator ($250 each), replaced the fuel line at the fuel tank ($300) and recently had the head gasgets done and repalced the timing chain guides and front shocks and all the rubbers in the front suspension($1,500). Other things take time and patience to do at home.
I guess if one has much to do in order to bring a car up to 'tidy and reliable' condition, one must put a value on that: hence a car is worht less than $3,000.
If it's in good shape then it gets a higher value, but most buyers won't know the difference until they commit to the purchase.