You might even go so far as an officer of the LLC to “personally guarantee” the loan, which makes a difference if bankruptcy ever got triggered. 

The bankruptcy and closing of mortgage companies in the past year are still happening.

I generally buy foreclosed houses either off the courthouse steps or through one of the auction websites after they converted to the lender, sometimes on sites like Auction.com, but sometimes I buy properties through the auctions ordered by the probate court or bankruptcy court. 

If there was a fire or some other total loss without insurance they would have to sue the borrower and often the borrower will just file bankruptcy to avoid paying a huge judgment. 

That's why I secure the option with a mortgage because I could do a friendly foreclosure with the seller involved and wipeout Jr liens behind my option as well as having a solid position during a bankruptcy where hopefully i could still get the property.

My concern is we sue and they cant pay the settlement and we got tied into bankruptcy court.

And what happens if the seller has to file bankruptcy?

Seller facing bankruptcy

As far as we heard, unfortunately the builder has filed for bankruptcy, so the chances of getting anything from them is extremely low.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs.