medium · National Real Estate Exam financing
A property is sold with a $250,000 mortgage. The buyer takes title 'subject to' the mortgage.
If the property value increases to $350,000 and the buyer defaults, what happens to the $100,000 in equity?
- It belongs to the buyer, provided it remains after the foreclosure sale and all liens are paid.
- It is automatically forfeited to the lender as a penalty for default.
- It is split 50/50 between the buyer and the seller under the doctrine of shared appreciation.
- It must be returned to the original seller because the buyer was never personally liable.
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