Should a seller carried note cover the land only, or package the barn into it too

The barn became a fixture the moment it was attached to the land, and in Tennessee that attachment is almost certainly already settled legally whether you called it out or not. Trying to carve it off as personal property after the fact gets messy, and a title company will ask questions. The cleaner path is one note and one deed of trust against the whole parcel, with the barn treated as an improvement on the land, paired with an appraisal or at least a written broker opinion that breaks out land value versus improvement value before you close. That way, if you ever find yourself in a foreclosure four years from now, you know exactly what you are holding and can make a cleaner decision about whether to foreclose or negotiate. The depreciation risk on the barn is real, and even so, 160k in remaining note balance against 18 acres of eastern Tennessee land that cleared 142k in 2021 is still decent coverage if that barn is worthless by year five.

Bundle it all as one collateral package, with a single note and a single deed of trust.

The depreciation risk you describe is real, though it may be pointing at the wrong problem. The barn will not fall to zero in seven years, and even if it dropped to scrap value, 18 acres in eastern Tennessee is still carrying most of that 160k note balance by year three or four given how that market has moved since 2021. The real exposure is whether the land alone at foreclosure still covers whatever he owes you at the point he defaults. Run a conservative land only appraisal today, and if it comes back at, say, 130 to 140k, that is your true floor. The barn becomes upside you are giving the buyer in the sale price rather than collateral you need to protect. The better move is to put the barn's value into the purchase price narrative in the note's recitals rather than structuring it as separate collateral. You acknowledge and describe the improvements, and everything sits under one deed of trust on the whole parcel, while your internal math shows you are comfortable with land only recovery if things go sideways. Splitting into two instruments on a 185k deal with a seven year note will cost you more in closing complexity and buyer hesitation than the protection is worth. Write one note and one deed of trust with a full legal description that includes the barn as a fixture improvement on the parcel, and you are done.