Pre-Foreclosure Deal with IRS lien - Advice?

[Owen Dashner]

I met with a guy this morning who is one month away from foreclosure auction. He has a crappy ARM loan from 2000 that he owes about $35K on at 11.95%. He also has a garbage assessment lien for $195, a lien from Capital One collections for $1300, and two IRS liens for roughly $8,500. So in total he has roughly $45K in liens on the property. He is basically willing to walk away from the property if someone will take care of the liens. He has had a really rough year and is not able to work due to a disability.

So I'm wondering how to make a deal out of this. The biggest stumbling block for me is the IRS liens for $8,500. Is there any way to negotiate with the IRS so they would take a lesser amount? An $8,000 swing makes a huge difference on this deal...

Is a short sale a possibility here, assuming I provided the first lender with the proper hardship letter, purchase agreement, list of needed repairs, etc.? And if the purchase agreement is for less than the balance of the first mortgage (and the lender accepts), would I just go to closing with the agreed upon payoff amount to the 1st lender, as well as the amounts owed to the other lienholders?

Any advice is appreciated!