I don't find it fishy at all.
If it's a gelding and you're not showing in breed shows, why would you care about the papers?
He didn't call it grade because it's not grade, it's a registered QH, he just doesn't have the papers. If he was an inexpensive purchase for the current owner, he may never have paid to transfer the papers.
FWIW, I own two registered QHs, and I don't have the papers for either. There were both free to me, and the previous owners have the papers. If I ever *wanted* the papers, I could call them and get the previous owners to go through their file cabinets, but I truly lack the motivation to do so. They're never going to show in an AQHA show, and nothing else I do with them will require papers.
If the advertised horse is of the nice all around local/pleasure/trail horse like my two guys (one is cow horse bred, been on cows and been roped off of, but casually - no show record and no big money won.)I suspect no one cared enought to keep track.