Calling all BPers: Need advice on how to structure a Deal

[Howard C]

I need advice on how to make a deal happen.

Currently a homeowner owes $1.3M on a loan and has stopped making payments on it for past 10 years.  Property is located in New York, which is known for their long foreclosure process and also the fact that the bank doesn't have the proper paperwork to move forward from a legal standpoint.  Market value of the property is close to $1.2M.

The bank has agreed to do a short sale.  However the homeowner wants $100,000 upfront before agreeing to short sale the property and sign any paperwork necessary.

He is willing to transfer the deed over for that amount.  Will transferring the deed immediately void a short sale with the bank since there would be a new owner?

Additionally, if a deed transfer is not possible for a short sale then how am I protected if I paid him the 100K, since the property is already underwater, putting a lien on it would be out of the question.

What would you do in this scenario assuming short sale price can be around $600-$700K?

Please let me know what you guys would do.