Tax implications on FSBO Primary Residence

[Zane Cress]

I know selling your primary comes with the tax free capital gains up to 250k/500k. Does a for sale by owner when they carry the note change that?

My grandfather is interested in selling me his primary residence and me making the payments to him instead of getting a bank mortgage. He owns the house outright. Would an extended payment plan over 5-10 years still be tax free each year for him if he doesn't get a lump sum all at once? I'm assuming the answer is yes, we would probably structure it without interest so the payments would be 100% principal with no interest to report.