Short sales

[Dan Burrows]

Has anyone been very successful in either buying the note on a second mortgage or shorting a second while leaving the first in place?
I have a situation where the property owner owes about $235K on a first and $80K on a second. The house now is valued at about $215K (not really worth that much due to issues below)
On top of being about $100K underwater on the house about 1/2 of the surrounding properties have recently had sink hole claims. Many of which are confirmed. The property is an investment property so walking away from the property is a little more of a hardship than it would be if it was a primary residence, due to tax consequences and deficiency judgments. The interest rate on the first mortgage is decent and to this point the house is not showing any sink hole damage although the house next door is. The insurance on the property will not cover the full liens even if they were to pay a full claim on the property. The property owner would like to keep the property if he can negotiate a very large discount on the 2nd mortgage. If the property goes into foreclosure the bank will get next to nothing for the 2nd mortgage so we feel that given the circumstances the bank should be willing to take what they can get.
It has been my experience that when the house is sold as a short sale the 2nd will usually only end up with about $2,500 and in this case if it goes all the way to sale they will get nothing at all.
Do you feel that it is plausible that the property owner could settle out this 2nd for 10 to 20 cents on the dollar or less?
We are in Florida which is a state that does allow banks to file for deficiency judgements so we would like to avoid this as well.