We honor this to the full extent of the law in letter and spirit.

Plan it out and let the plan germinate, grow and flower before you submit your letter of resignation.  

Terms of financing are:Purchase Price: $31,500 Down Payment: $1,575 Monthly Interest Only payments of $149.63 for 36 months Balloon of $29,925 due in 3 years(Side note: is a good deal for a buyer? 

They proposed the following with seller financing:Purchase price of $165K$25K down paymentLoan at 7%, amortized over 30 yearsMonthly payment of $875 (actual payment amortized with these #'s would be around $935)Balloon payment for balance in 5-7 years.My question to the BP community is what do you think of these numbers?

I would advise to make sure you follow the letter of the law and do not deviate from that.

(loan against my dot/note)$50,000 1st position deed of trust/note (only lien on title)Secured by $450,000+ newly remodeled property with clean titleNo interest rate, past balloon date so can be called due at any time (was placed as interest in home)Property is titled to an LLC so homestead exemption wouldn't apply in event needed to forecloseLooking for a short-term loan using the note and deed of trust as collateral. 

Maybe he gets 20% of the rents in perpetuity and that passes on to his heirs and there's a balloon due in 15 years?

Most lenders will not call the HELOC due at the 1 year balloon either, provided you are making payments on it regularly.

See if those property values are higher than the list price and do some due diligence and get on the phone with the home owner or send them a letter to find out what work might need to be done. 

if you are mailing them a letter, make sure to use ADDRESS SERVICE REQUESTED to insure you get their current address in case they have moved on.https://pe.usps.com/text/qsg300/Q507.htm