Last June, reluctantly sold my motorcycle. I still owed around 3000 on it and had to deal with this. What ended up happening, is the future owner ended up getting financing to buy the bike. In turn, the bank he was getting financing from wanted to be SUPER sure that the bike was properly paid off and ownership was transferred to the new owner w/ the lein to his bank. They made the appropriate phone calls to my bank to verify exact payoffs, sent the check to the bank, and made sure the title was transferred into his name. Overall, the bank made the process quite easy.
I say, talk to his bank and let them know he is selling to a private party. They will tell him of the payoff amount as of a certain date. Then, if the prospective buyer is financing the purchase, he will need to tell the bank how much your friend owes on the car. If the prospective buyer is paying more than what is owed on the car, two checks will be cut. One to the bank for the remaining balance of the car and another to your friend.