How this capital is accounted for depends on any agreements made between parties. 

If portfolio growth is not the goal, then it definitely reduces some of the risk on your side including third party risk (the bank being a party with a vested interest in the property), but also yield adjustment risk.

They should only be used when you're 100% certain the other party is familiar.

In my area, most agreements state that the closing costs are split equally between buyer and seller, but sometimes one party will pay everything. 

And like a marriage, while you can certainly get out, if both parties aren't mutually on board with getting out, it becomes very messy.So, like a marriage, yes, you can meet your partner online.  

If the policy lapses or is canceled due to ownership changes, the property could be left uninsured, exposing both parties to risks.

If you are a third party and Sally is paralyzed, thinking she can't foreclose, you can buy her out and exercise her right of first refusal (and acquisition of the 2020 lien) and you can foreclose.

@Dana Brash only you are restricted to the disqualified party rules.  

Can I use my own AMC and third party? 

The fortunate part is that I did 90% of the work so actual cost was only material and alot of my time.