Buying a house where seller carries mortgage.

[Ben Kirchner]

Here is the situation:

My friend is about to sell her house.  She says she is looking for $180,000, and will put it on the market in about 6 weeks.  My wife and I are interested in her house, and have discussed trying to purchase it.  However, if I close on this other investment property I'm working on, my capital wouldn't be enough for the down payment on my friend's house.  I'm thinking how I could be creative in a proposal that works out beneficial for both parties.  I've heard of people having sellers carrying the mortgage for periods of time in a purchase.  I wanted to get insight on people's experience with this, and how it works exactly.  

First of all, take the fact that the seller is a friend of mine out of it, I'm making the proposal as if we're strangers, and both parties are to benefit.  My proposal would be that the seller carries the mortgage in her name for 3-6 months.  We would pay her mortgage + $100, and she would continue to gain equity of the house during this time.  We would then purchase the house for $180,000, within the 6 months.  This benefits us in that we're not missing the opportunity to buy the house due to bad timing, and it benefits the seller in the sense that she is guaranteed to get her desired $180,000, and will get an extra $100 a month + all gained equity in these 3-6 months. I have yet to make this proposal.  In my head, it sounds like a win-win.  Am I right?  Do I need to sweeten the pot more?  Or dial it down any?

If all is well on both ends, I will plan on making this proposal.  However, how exactly does something like this get executed?  What ind of arrangement and document needs to be put into place to protect both parties?  Something that states the house is ours if purchased in 6 months, and that the price is locked in at $180,000?

A big thanks to the experience and knowledge of those chiming in on this!