Basically, since you're reporting the sale of real estate, one of the questions you'll be asked is if the sale is seller financed. Indicate that it is seller financed, and follow the prompts from there. Note also that it's expected you have a formally written and signed loan agreement also. Otherwise, if this loan is defaulted on (and most seller financed loans are) you will have one heck of a time dealing with that on your taxes - not to mention the foreclosure process.
