Seller is to pay ZERO towards the closing.Seller's obligation to close contingent upon lender accepting proceeds of the sale as final and full payment satisfaction of note and mortgage deed indebtedness with no further recourse of deficiency judgement against seller.The lender is going want a net when they approve.

Deficiency judgments are more complicated with a lead lender and participants.

This can be important to you doing it as an installment sale rather than buying with cash, an installment sale won't have a deficiency element and if things go south you could walk away deeding back to the seller (say it ends up going to auction, that's not your interest or plan, but it can be sold providing funds to your seller.The note allows the interest deed transfer, then negotiate with the other in cash, you don't need to disclose your purchase price.

Do not purchase "train wrecks" - homes that have structural deficiencies that will cause probems with inspectors, appraisers, and banks when the market returns.

A lower price doesn't harm your seller unless the lender is going to pursue a deficiency.

Generally the amount owed is significantly higher than the actual tax deficiency due to fees, interest, etc etc etc they tack on.

Short sale listing price doesn't mean squat unless it is pre-approved for all parties involved with the loan.The lender or lenders and any junior lien holders might want deficiency against the seller or sellers,to put cash in the deal,to offer up another property that has been cross collateralized etc.You are only at 41,667 a door for 800 a month rent.I highly doubt this property is performing at 90% with those prices.If it is a lender will not be taking a huge hit like that.There has to be much more to this story.This is why I say "pre-approved" is critical.The broker/agent could have listed low to suck buyers in and put in offers and then the bank counters and they get the investors up on price.

I would even be willing to contribute to the PMI loss over a period of time.As for the HELOC I am wondering about the possibility of turning that into an unsecured debt to pay off interest free over 10-15 years with a promissory note (they can even hang the threat of a deficiency judgment over our heads if we default on that note).

You're looking for obvious deficiencies and damage.

Your question(s) concern the perspective of a junior lien holder as to how s/he is affected when senior mortgage goes to foreclosure sale.Generally, Junior lien holders are "wiped off" but the debt is not wiped out and remains, but unsecured.As a junior lien holder, remedies include:1) advancing funds to cure first mortgage in order to protect position;2) hoping for a forced sale that generates sufficient surplus (overbid) funds to pay junior debt;3) litigation to set aside sale due to claim of deficient noticing to junior bene (lien holder)Junior lien holders' claims for over bids are typically "pro-tanto" in nature, in that they are paid according to order of recordation, absent subordination agreement that would change order of lien position.If you are considering investing in junior trust deeds or mortgages, be sure to study title laws specific to the state(s) you are considering buying notes in.