Why would a seller opt for seller financing and 20% dn for fixer?

[Tony K.]

I'm looking at conventional financing to purchase a property, around 250,000 where I can pay 10% downpayment and get approved for the total amount. While the house needs small cosmetic upgrades, it sounds like it would pass an inspection through the bank (speculation at this point), given the buy price is below the market price and it's livable. 

I spoke with the FSBO home seller and he said he wants 20% down, and the rest paid off within 10 years. I don't plan to keep the house for 10 years (will likely sell), but sounded like he was interested in a seller financing contract, and spoke of balloon payments within 8 years as well...

But why would a home seller want a 20% down payment, and seller financing if I can get conventional financing for the house and pay his asking price at escrow? It would help me in making 1/2 the size of a downpayment, own the house outright (in case I sell before market drops), and he would receive all the funds all at closing.

When asked why he preferred a seller finance contract, seller mentioned he prefers residual income than at once.

Is there something I'm missing?

[J Scott]

If structured correctly, he may be able to reduce and/or spread out his tax burden.