Flip in CA - Seller financing hen they still have a loan - help?

[Irina Costea]

I have a neighbor that is in a distressed situation. She is in foreclosure, with a primary mortgage, secondary mortgage, and an additional lien on the property. She wants to sell, pay off all her debt, and move out of California to Ohio, where she has family. The house is in good condition, but needs some cosmetic and space planning work in order for it to sell for top dollar. She wouldn't be able to sell it on the market for how much she needs to pay off all her debts and have enough to set her up in Ohio (she already tried).

My partner and I are trying to "buy" the house from her for a certain amount of money, will take over the mortgage payments, fund the fixing of the house (our own cash or HELOCS), and then will sell it for profit. She will receive the initial "buy" amount that we agreed on, a portion of which is going to be paid up-front in order to bring her mortgage current and give her enough to move out to Ohio, and then a percentage of the final sale amount.

The reason this flip works is because we are avoiding going through two purchases and also avoiding financing fees from a HML on the purchase of the house, since the owner will still own the house during renovations.

Since she doesn't own the house outright, this isn't really "seller financing," but maybe more like a joint venture?

What kind of legal documentation do we need to make sure all parties are covered in this situation? I would assume that she adds us to the title via quitclaim deed, but the mortgage(s) stay in her name. She will move out to Ohio, we fix up her house, put it on the market and sell it, and she will do her part (signing documents, etc.) from Ohio (the percentage of the sale price is the motivation for her cooperation).

I feel good about the fact that we are swooping in at the very last minute and are able to help out a neighbor, while also giving us a nice flip opportunity. Being able to pay a higher amount because we can avoid major holding costs from a HML is what is making this deal work. I just want to make sure that all of us are covered and protected legally. Everyone is happy right now, but if bumps arise, I want to ensure both her cooperation and that we make good on our promises.

Has anyone done something like this? How did you structure the deal?

Did you have issues with the loans being called once the quitclaim was recorded and there was another person on the title?

If nothing else, does anyone have a real estate lawyer in the Los Angeles area that they have worked with that you would recommend?

Thank you in advance for your help, advice, and referrals!