Hitting the rev limiter in 1st or 2nd (done it once or twice, not deliberately) feels a lot more than a hesitation. With your foot mashed to the floor and major acceleration going on, your brain does not expect a let up in acceleration until your foot comes off the accelerator. If you hit the rev-limiter with your foot still down your brain doesn't expect it and so it almost feels like you have run into something - the power disappears.
In 1st gear the rev counter is a fair bit slower than the car, so the limiter which cuts in at 7200rpm (genuine) nabs all the power at an indicated 6000rpm or so, but it keeps up in 2nd gear. There are a few possibilities:
1) Something is wrong with the car and the seller is making something up about it signalling when to shift. The car does not give any sort of hesitation signal to change gear.
2) It is the rev-limiter that you hit and the seller is telling the truth that he uses the limiter as a signal to shift. If this is the case, run in the opposite direction as quickly as you can
The rev counter in an M5 lights up with yellow and red bars. The yellow bars go out as the engine warms up, but the final one at 6500rpm stays on as a warning that you should be thinking about changing gear. The red lights start at 7000rpm and this zone should not be entered to avoid damaging the engine. If you happen to get it wrong and over rev the engine, there is a cut out at about 7200rpm to stop you blowing the engine up. It aint good for the car to be constantly revved up to the limiter.
Hope this helps