Short Sale - Owner owes less than property is worth

[Laureen Youngblood]

We have a very motivated seller on a Foreclosure property.  We have a settlement statement from the bank.  We want to offer less than what she owes, (obviously).  Question is, her settlement statement includes all of the late fees and interest from her not making payments for four years.  They have started the foreclosure process.  What she owes -penalties and all- is about what the property is worth as-is.  Is it feasible to still get the bank to settle on a short sale offer?  The house is not liveable and will not qualify for a conventional homeowner/loan.  We want to make the right offer and not mess this up, as it is our first truly motivated seller property and the property is exactly what we are looking for in a rehab.

Any suggestions on making this offer would be greatly appreciated.