Fair discount that justifies buying a house with clouded title

[Greg Gaudet]

Aloha all,

So we're in escrow on a house that had a wild deed recorded on title years ago. The seller went to court and won a writ of possession, effectively clearing up the title in her name. However now that we're in escrow the title company will not insure until the wild deed is expunged; meaning they want it erased from title as if it never happened even though it has been overturned and title is in good standing. Seller wants to close asap, as she sold another house and is using proceeds from both to buy her replacement home. She's not willing to do the expungement (which is ridiculous, bc if she doesn't do it now she's just going to end up having to do it for the next buyer if we canceled). 

Anyway, without getting caught up on the details, I just wanted to ask some really experienced investors what kind of discount they'd want to justify buying a house without title insurance, and known past issues that have been proven false on title? 

The numbers are: PP 617k, rehab needed about 70k, ARV 850k. For me, these numbers are good for a flip, but they certainly do not justify taking the risk of no title insurance. I am requiring seller to expunge the wild deed so we can close, and I am offering to split the cost with her. But she's demanding I close now, as expungement will likely take 3-5 months and cost 5-8k (per our attorneys).

I have purchased a condo via quitclaim deed that was not insurable. It was worth about 100-110k as is and I bought it for 50k. I did a 20k rehab and the ARV would be 150-160k with clean title, and I think I could probably get 100k for it as is. So not a screaming deal, but not bad, and a small amount of money to risk on this. Plus I know the backstory, as I was on the board at that HOA, and I know the chances of the former owner (he's in his 80's if he's still alive and left Hawaii a decade ago) are extremely slim.

Having said this; I'm considering telling my seller I would take similar terms.. about 50% off retail, so around 400k maybe to buy the house as is and take on the expungement myself. 

Thoughts?

[Jonathan R McLaughlin]

If your attorney's are sure the expungement would take then insure with exception, close now at some discount and escrow the 5-8K to reimburse? Not sure I see 50 cents on the dollar for a solvable problem. You probably know more than I do though.