What may occur if the seller does not pay off the existing mortgage and the buyer does not assume it?

In the scenario where the seller does not pay off the existing mortgage at the closing of a sale and the buyer does not assume the mortgage, the buyer takes title "subject to" the mortgage. This means that while the buyer becomes the new owner of the property, the existing mortgage remains in place, and the liability for the mortgage payment remains with the seller.

The phrase "subject to" indicates that the buyer has acquired the property knowing that there is an existing loan and that the seller is responsible for making the payments on that loan. If the seller fails to make the payments, the lender may still pursue foreclosure on the property, but the buyer retains ownership. This arrangement is crucial for understanding the implications of such a transaction, particularly concerning risk and responsibilities pertaining to the mortgage debt.

The other options provided do not accurately reflect the legal implications of the situation. The buyer cannot immediately sell the property because doing so could complicate the existing mortgage situation. The seller does not retain ownership of the property as the title has transferred to the buyer; rather, they hold the mortgage liability. Finally, the loan is not automatically forgiven; the lender retains the right to the debt regardless of ownership transfer. Thus, the correct answer reflects the real estate principles involved in