Once you have had your end buyer put down the 5k EMD (deposited as a cashiers check or wire to your title company or settlement attorney, NOT YOU!)

On court date she appeared on court and we came to a settlement of $900 and vacate the property on July 22. 

One would be to lower purchase price to cover those expenses and get work done after settlement before winter sets in and causes even bigger headaches when things start to fail. 

Also, dont forget to add other costs to your depreciable basis of the house such as:1) if any improvements were done to the house2) The following items are some of the settlement fees or closing costs you can include in the basis of your property.

The lawyer told them that when they sell the house they can negotiate a settlement for perhaps 1/2 of what they owe.Their credit has been significantly affected by the heloc default.

The QI normally is listed in the seller box of the settlement statement "XXX as QI for John Doe". 

I would pay the amount I owe up to the day of settlement..

There may be a lot of fraud (especially here in South Florida) but for a homeowner who has this vacant property that they don’t know what to do with, I would still think overall that completing a short sale (with acceptable terms from the bank) and having their credit reflect a settlement on their mortgage would be the more safe route.

The cause of the bulging appears to be from settlement of the basement foundation and former water infiltration.

Also make sure you get the security deposits from the landlord at settlement.