If the buyer is a trade or business they would be correct in filing the 1099-Int - IF it is paid direct to the seller, If paid through and escrow company, the escrow company would file the 1099. Same Answer.

So long as there is only one 1099, the interest has not been overreported to the IRS.

BTW I normally enter the installment sale interest direct to Schedule B, just makes it easier for me to track that way.