You did not ask this, but somebody else mentioend - I also have somebody contacting about Lease with Options to buy. Basically they are trying to sell their house out ot town that's a very slow market (Seattle) and they don't want to carry two mortgages, hence the question. There are also MLS listings that closed with Lease with Option to buy .
Seller financing is not very prevalent in my market place because it requires the Seller to have a good deal of equity in the property being sold with Seller financing. Unless the Seller has owned the property for a long time or put a good amount down, it's not even an option. Also, Seller's who are selling to buy a larger home need to cash out their equity, so Seller financing won't work for them either. Many other listings in this marketplace are actually over encumbered and trying to do what we call a short sale or short pay transaction. So of course Seller financing on these are also not an option. With values still drifting downward, I wouldn't recommend Seller financing right now since the only cure for non-payment is forclosure.
In some of the rural areas I serve, seller financing has always been around. Until the 20th (yes, 20th, not a typo) century arrives, I expect it to continue. I don't care to extensively comment on intent or default rates in this public forum--suffice to say, it's actually a side business for some unscrupulous people. I've heard many very sad stories. A "poster child" situation that should help popularize buyer representation as the standard. Back to your question, I have seen a small increase in legitimate offer to finance by owners. Not much mind you, but enough. Stricter lending controls are taking their toll on the middle class. A wise owner, with the financial stability and savvy to finance, stands to make a tidy profit.