Can you combine hard money with seller note?

[John Mills]

looked at and missed a deal the other day. Cash buyer snatched it up. Here were rough specs:

ARV 200K

Repairs 15K

Sale Price 100K

For some reason, seller only wanted 80K at close and a note for 20K payable at 7%. Interest only monthly payments for 23 months with

balloon/payoff on month 24. 

Note was unsecured

We missed it but asked hard money lender if they would lend on a deal like that and they said no. It looked like win/win all around. Am i missing something? Do hard money lenders avoid any deals with seller financing? Im confused since the note had no ties to the property. I understand their position if the note is secured to property but if its not.....?