What happens if a buyer does not assume a loan in a property transaction?

When a buyer does not assume a loan in a property transaction, the seller retains the liability for that loan. In such scenarios, subrogation becomes relevant. Subrogation allows the seller to stand in for the lender's rights and may pursue collection of the debt or recover debts related to the loan, but this is often explicitly limited to certain actions like foreclosure.

If the buyer chooses not to assume the loan, the seller remains responsible for making the mortgage payments, and the lender still holds the seller accountable for the loan. Typically, the seller can seek to recover their situation from the buyer through subrogation, particularly if foreclosure becomes necessary to recoup losses. The nature of this arrangement is crucial because it also emphasizes the implications for both parties involved in the transaction.

The other options do not accurately depict the consequences of a buyer not assuming the loan. For instance, the buyer does not become personally liable for the loan unless they specifically take on that responsibility. The idea that the seller can never recover any funds is incorrect as they may utilize legal avenues to pursue recovery under certain conditions. Lastly, the notion that a buyer automatically takes over all debts does not align with how loans and property titles work unless there is an assumption agreement in place, which