This is NOT POSSIBLE if you are an heir, successor in interests, gave any beneficial interest or have any fiduciary duties as executor, administrator, personal rep or trustee, receiver, etc.This is an area that I'm pretty exoerience in.The bigger issue is that the original poster knows soneone who wishes to pledge an assets as collateral which they do no have title to.

Can I do a land contract for the deed and finance the down payment to the owner with a secure line of credit collateralized by the property?

A marginal property with no money down if you have cross collateral of other assets or a personal guarantee then you stand to lose a lot on the debt obligation.Properties like that can needs ongoing repairs.

I would need $2500 to place the bid which wouldn't be a problem and I think I have budgeted for worst case scenario for the bid ...but I guess maybe it was wishful thinking on the rest.I'll just have to get everything in order and catch the next good one.I wonder...will a private lender accept collateral as the 20%?

I have done killer deals where I had to enforce my contract.One way to protect yourself is to have the other partner pledge some collateral to protect your investment.

You accept the price and agree to give them a downpayment, let's use 10% for this exercise, of $10,000 with the remaining $90,000 on a Promissory Note that is collateralized by a Deed of Trust on the subject property.

Let's say I'm carrying note with a Security Deed as collateral.  

Ask a community bank for a Business Line of Credit with the property as collateral - accomplishes your goal and less paperwork.

For the same return, he has a lot less risk in buying notes that are collateralized by real property.In P2P lending, the default rate is about 7.5%, which is a number I would not be happy with.

So, just like if you were to ask for cash, you need to be willing to provide something in return -- services, collateral, promise of future returns, etc.