I don't think you are going to be able to get insurance for two separate living units in a single-family when they are both illegal and likely do not have the correct egress windows (basement) for fire safety which could subject you to huge liability if something happens to either party.

There are actually THREE kinds of subject to transactions1- subject to existing mortgage without lender approval2- subject to existing mortgage WITH lender approval3- subject to existing mortgage as part of a seller financed wrap around mortgage.with #1 and #3 it’s in everyone’s interest to utilize a third party servicer, who collects and then distributes payments.  

-how is management split among you, PadSplit and any other third parties?

(Photos from a third party inspector)

We only charge third-party fees like the appraisal and the borrower pays the vendor directly.

Work with your commercial lender/insurer/lawyer/personal banker and see if they know of any interested parties.4. 

Quote from @Patrick Roberts: Echoing what Chris said - use a third party servicer.

@Spencer Cornelia can't believe i missed this part. i was actually browsing youtube and came across your channel, small world!

@Caleb Genry I am late to the party on this, but would greatly appreciate the spreadsheet/log if you are willing to provide it. 

So, the financing party can hire an attorney, get a judgment and that judgment is acceptable for filing at the county.