So... I cant' speak to your players, but mine would not pay an entire soul for basic equipment, especially if there's good chance they will be able to scavenge as they go - get a table leg club, use it to kill a goblin and take its short sword, use that to kill an orc and take its battleaxe, and so on...
So, I recommend the fiend take the "First one's free" approach. "You need basic, non-magical weapons and armor? Wow, you guys are cheap dates! Sure, here you go, on the house. Look me up again if you need something interesting....poof..."
That basic gear can be enough to allow the to get in over their heads, to the point where they need something that isn't basic. On his second visit, maybe they have some coin, and he can charge some reasonably inflated money. The third time, they are probably in deep kimchee, and they need some serious firepower, for which he can charge something serious - like 50% of all treasure if they survive and escape the dungeon, and their souls if they don't..."