Do not get excited about getting a low offer signed by the seller as the lenders valuation will be the ultimate determining factor of approvable sale price. 

I'm looking to sell my first home, which I've been renting out for the last 2 1/2 years -- I first contacted my property management company  for seller services, and they initially wanted a year exclusive selling rights.

The seller has considered seller financing with 20% since this is a paid off property.

There's either a lot of clueless sellers or my sold comps are too narrow.

Quote from @Clint Miller: Seller financing opens up great opportunities for real estate investors, but coming up with the down payment can still be tricky. 

Bank pushed us to 40% down payment so also executed a $85K seller carry-back loan to cross the finish line.

I’m considering a 20-unit multifamily property listed at $1.6M, but the seller has indicated they’re willing to accept $1.25M.

One trend I have seen shifting in my market, Sheboygan County, is going from a sellers market to a buyers market. 

Jonathan,First off I would ask "Why Seller Financing"?

I'd also ask if you've confirmed with the agent the seller will consider only selling you 4 of the 6 (unless you have someone else that will buy the other 2)?