Subject To Question

[Brandon Bohland]

I have a seller willing to do seller financing. I let him know that if any time I miss a payment on his mortgage, he would have the right to take the house back, along with all of the equity I've paid down while I've had it. He then followed up with a valid question. He asked what would happen if I (or a tenant-buyer) was in the middle of renovating and I just decide to walk away?

It's a valid question that I would probably ask if I were in his shoes. It is my full intention to never do something like that to someone. Has anyone ever had a seller ask this question? If so, how was it addressed?

[Jon Holdman]

If you buy subject to the seller DOES NOT have the right to take the house back if you miss a payment. If you buy subject to the seller has effectively ZERO rights for the property. You should be very careful in your representations to the seller about their rights. Anything you say can be held against you in court. The seller can, of course, sue you. But after the sale closes they no longer have any interest in the house at all.

If you purchase with a wrap mortgage, then the seller would retain a security interest in the property. That still does not give them the right to just take it back. It gives them the right to foreclose if you don't make payments. That's a process. It takes time and ends with a sheriff sale where they may or may not get the house back.

The "walk away during renovations" question is no different. Their remedies are the same regardless of what you've done with the house.