As the other said, all deals will be alittle different but basically they work this way...
You sign an agreement to pay X amount per month with X amount of the payment going toward the purchase of the home.
A purchase price is agreed to at the start and if you continue to make monthly payments, X amount will be deducted from the purchase price each month.
It is usually not alot. An example...Lets say you agree to a purchase price of $100,000.
You are asked to pay $1000.00 per month and the owner will apply $200. to the price of the home.
After 1 year, you will have applied $200. x 12 or $2400. to the price of the home making the balance 100,000-2400=97600.
There is usually a time limit on this deal when the owner will want you to finance the balance thru a mortgage/bank. Lets say they give you 5 years. after 5 years, you will have paid $2400. x 5=$12000.
That would make the amount you need to finance 100,000-12000=88,000.
As I said, all deals are different. Some owners will apply more to the balance, some less and some will allow you to continue without financing for different amounts of time.
They main thing would be to make sure that the agreed to price is fair. You would need to have an appraisal to be sure, before signing anything.
If for instance, the agreed to price was higher than the appraised value, when it came time to finance, you may not be able to because the home may not appraise for the amount you need to finance.
A lawyer could be of some help if you decide to make a deal like this.