Selling Financing 101

[David Bittorf]

I just heard about the idea of selling financing for the first time and I'm really intrigued.  Let me see if I have this right.  Let's say there is a property for sale at $400,000.  You could make two offers:  one at $375,000 with traditional financing and one at $450,000 with seller financing.  

Traditional Financing:

Pros for seller: Gets lump sum of $375,000 immediately  
Cons for seller: Closing costs, pays taxes on $375,000 (unless it's invested into a new property), $25,000 less than asking

Seller Financing:

Pros for seller: Gets $50,000 more than asking, no closing costs, no tax penalty  
Cons for seller: Paid out monthly ($1,250 for next 360 months), rather than a large lump sum

My question is this:  If the Seller says "Yes lets do seller financing".  Now what?  How do I get the legal contracts etc.  What else do I need to be aware of.