Or, negotiated between seller and buyer.I've done any number of deals where I purchased the property or made a loan subject delinquent or defaulted property taxes without paying them off entirely upon transfer of title.However, someone's got to pay. 

In fact most private lenders buying these loans in the secondary market are offering to restructure the loan to make it affordable.2)  Homes with borrowers in default are almost always poorly maintained, adding to a sense of general decline in the neighborhood.  3)  When these houses do go back to the lenders, they are fixed up and resold, improving the neighborhood and restoring the tax basis (they are almost always behind on the taxes).4)  If lenders are going to have their contracts voided then the result will be that fewer people will make loans and they will be at a higher cost.  

@Florent Gonthier, this is really dependent on your budget.I would love to see you in a freehold investment rather than a condo one, if possible, but condo can do the job if that is the default option.Feel free to connect with me privately if you prefer to discuss your personal criteria that way.You are correct that your Realtor should be able to lease the unit for you.

They have had their fair share of defaults on debt deals, but to my knowledge no one has lost principle.

The actual return of a 10K investments spread over two hundred 50 pound loans is a matter of the statistical default rate.( In fact the model is better because there is collateral as opposed to the unsecured loans on the Prosper and Lending Club models.)Unfortunately from what I understand US investors are currently not allowed to invest in the UK (hope the links work from the US)- but perhaps there is something to be learnt from the model ?

Back in the 80's when the Labour party had run the country poorly and interest rates were in double digits, people still did not default on their mortgage. 

FHA will allow you to use this level payment amount for qualifying purposes, which is typically much less than the "default" 2% calculated payment amount. 

My first concern: If he defaults on paying a subcontractor, if I didn't engage that subcontractor and our contract says that Sam is responsible for that, can the subcontractor put a mechanics lien on the property?? 

(Unless you already know they are in foreclosure or in that case you would be more direct and say,"I am a local investor and I do research on properties in my area(try not to say anything negative like getting foreclosed on default etc.).

If they refuse the note and DOT, then something else is there, like accept payment, declare default, file a quit claim deed (which now circumvents foreclosure laws) take it back, rinse and repeat.