This may be a noob question but Could a seller offer 100% financing on a property if the house is not free and clear?
Yes. The seller could combine all of his remaining equity with the existing financing and create one loan with one overall interest rate. This would be called a “loan wrap”, “wrapped loan”, “mortgage wrap” or “wrap around mortgage”, etc. These are also frequently understood as an All Inclusive Deed of Trust or A.I.T.D. The AITD just means wrapping one note around all the loans and equity to make a single loan.
That all said, traditionally a seller would ask for a down payment (a portion of his equity) as a condition of financing the remainder of the purchase price. In your case, the seller would be financing the entire sale price which includes the down payment, underlying loan(s) and otherwise remaining equity.
So the answer is “yes,” a seller can finance a buyer 100% despite there being an existing loan balance. :beer