Get him to sign a release of possession form before you give back his security.

They ran the loan like a personal loan, and in the end, the loan was made to two of the four members with the LLC guaranting the loan and executing the security interest. 

A foreclosure is the forced sale of an asset in order to liquidated the security.

  :)And there are companies here in Oregon and Wa that hook up with RE brokers , ( these companies are HML) they track all the sales have a very sophisticated software system. they bid for you and also provide the cash for you at sale.So it goes like this.say you want to bid on a 200k house you need 40k. you deposit that with them.they win the bid they put up the 200k .. they take a security interest on the recipt from auction.. then when trustee's deed comes they roll that into a HML.they charge a fee for the buy .. and then charge you for the HML usually 4 and 14 , and then you do the rehab and your free to use anyone to resell. 

However, if the housing court record is pulled by name, date of birth, and/or social security number, then I would have more faith in it and ask the tenant to get that letter.

Should I collect a security deposit, and upfront payment even though I'm sure he did that with the previous landlord? 

The insurance is only an extra $10 a month...Will make sure pool area is safe and secure with fencing and have tenants sign a pool waiver. 

It could be a non-secured loan for all I care.

-Yes I will be securing the property-What do you mean by "how can this be equal?"

I have a couple of rentals, but I am looking at a great deal that I can flip, but want to offer seller financing to secure cash flow coming in.