Question on holding paper/note for developer

[Shawn D.]

Hi!  We have a house in FL, New Smyrna Beach, about 3 blocks off the ocean.  We've been renting it through VRBO for 30day min(zoning), but only making about 2.5% APY on it after all expenses.  We put it on the market for 565K and it's now sitting at 509K  It has a double lot, but that can't be split without knocking down the home.

A offer came in for us to hold the note for a local developer who just sold a house around the corner for 725K (brand new const).  

He is offering 500K, with 100K down, and then a 3 year balloon note at a 6% rate.   

What do you think?

What concerns me is that he will most likely tear down the home currently, split the lots (they are already subdivided), and then begin construction on two new homes.   What happens if he gets into money trouble and can't pay?   I'd need to Foreclose, but I live in California.  Then once I get the property back, I'm left with maybe a semi built home, or only 1 of the two lots.  Each are 5000sq ft lots.  

Any advice?