Are seller-carryback mortgages risky?

Seller fears loss if buyer files for bankruptcy

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DEAR BOB: If I sell my rental house to my tenant and carry back a mortgage for my buyer, what happens if the buyer-tenant goes bankrupt? Is there any way I could lose my right of foreclosure to some other creditor? --Bill K. DEAR BILL: No. Your seller-carryback mortgage (or deed of trust) should be secured by the rental house you sell to your tenant. If your buyer files Chapter 7 or Chapter 11 bankruptcy, you remain a secured creditor because your mortgage (or deed of trust) is recorded against the house's title. Purchase Bob Bruss reports online. Nobody can get ahead of you in priority (except the local property tax collector who always has top priority for unpaid property taxes). You might have to wait to get paid, but you have the mortgage security recorded against the property you sold to the tenant. The best thing that could happen to you (but probably won't) is: you have to foreclose; no bidders show up at the foreclosure auction; and you get the property back to sell again for ...