Terms are very important to any real estate deal. Clearly defined terms protect you, and sets the expectation for the borrower. Standard terms include the interest rate, payment amount, and the due date for payment in full. There are also late fees, default clauses, requirements for insurance, and other standard provisions.
While the terms can be whatever the buyer and seller agree upon, sellers that charge 2-4% above the standard mortgage interest rate increase the value of future payments. The buyer still saves on the expensive loan fees and the seller is compensated for having to wait for payments. Charging a below market rate means the buyer is unlikely to refinance in the near future. It also results in a higher discount should the note be sold.