Hi,
There's really two parts to the question here...
1) What happens to the property? - if its a lease/option or terms contract, then title remains with the vendor-financier. You go through the default process under the UCCC, and foreclose and remove any caveats etc.
2) Are you able to lay claim against other assets? - we'll the question here is, what is your liability?
If you claim is that you bought a house for $X and sold it for $Y and now you want to claim for the difference $Y less $X, then I'm not sure about that.
The wrapping business is about margins offsetting risk and time, while the house was in the possession of the buyer, it was an asset earning you an income (like a vehicle that has been leased out).
Once that house has been refinanced or bought out, your capital profit margins cover your buy/sell costs and profits (like a residual on a leased car).
But if the house is return through a default, then (in my view) it just trading stock which isn't being utilized which needs to be re-leased.
I spose you could claim loss of income and work out how to be a creditor - however if the price of the property has gone up during the time it was sold and foreclosed, then (in my view) you have had your "lost income" covered by the capital gain.
And then if you were to re-leased the property, the greater value will mean higher repayments and a greater margin between your sale price and underlying mortgage.
In my view, your time will probably be better spent finding a new buyer than chasing an old one.
Your business plan should include a section on risk mitigation - which includes the "what if" questions.
The scenario - "what if" they default, should list all the costs and time issues with defaulting, foreclosing, relisting, selling, etc and all the running expenses. And % chance it occurs.
Then you factor this as a cost to your business, you base your profits on top of this costs, so that in the worst case scenario your "profit" already factors in these costs - or minimum profit at least. Risk scenario should also factor capital gain - ie if you have to do a normal sale - will you still be ahead.
Otherwise, if the default/foreclosure scenario doesn't occur - you don't incur such costs and your profits are better - but at least if it does - you factor it in.
In other words, plan for the worst, and hope for the best.
Regards
Michael G