Help in diagnosing compression issue

[jailhousebob]

So I recently looked at an 8cm merc flathead that was for sale.The seller thankfully left the engine in the old truck it had been transplanted into so prospective buyers could hear it run.
Checking compression showed about 120 lb.s in each cylinder.When I got to #8,it pumped right up to 120 but drained back down instantly.I'm guessing the problem is a hung valve but concerned it may be more serious.The motor starts right up and runs good,of course the # 8 cyl is not firing.No water in the oil and no bubbling in the radiator so I don't think it's a crack.
I'd like to make an offer on the motor but without knowing what the issue is I don't want to overpay.
Any other ideas on how to narrow down the problem?
I have him soaking the offending cyl in fuel oil and marvel mystery in hopes it would free up the valve if that is the problem.
Thanks for any help,Bob