They default the automatic renewal to Yes. 

also if the balance was 285k if could be way higher with default interest tax's insurance etc etc.

A default or unethical action could leave you liable.

A default on the mortgage later would have been an acceptable risk in their position and worth the lump sum upfront. 

If they do, you will win by default and get a judgement against them.  

Which most likely they will not continue to make payments on(if they didnt stop much earlier making payments) and that lien would also likely default.

I can tell you that many a seller literally hopes that their buyer's fail as a landlord, as they can collect your down payment, and whatever payments you make before you default, and then they get the house back that they can sell again.  

It shows you from beginning to end on buying/flipping/managing defaulted mortgage loans from banks.

@Daniel BryanI agree with JacobBetter returns elsewhere and downside is if your borrower defaults depending on the state it could take years to foreclose and run all that legal and holding costs which wipe out any gains.

Since my post, I've learned the IRS default for a single member LLC is to give it disregarded status upon formation.