@Joe Villeneuve  Owner owes 130k property worth 85k. 

They owe about $4k more than it's worth and no one will make any offers.

I believe they are worried that the tenants that owed were trying to get the service switched to a new name of a friend or kid (So they can start ruining their credit as minors) so they don't have to pay the previous bill.I sent over about 50 pages of documentation to verify ownership and the new tenancy (This property has a multi layer entity structure ownership which is why there was so much paperwork) but once they got enough info to believe they are new users it wasn't an issue.

When we locked in the rate, our credit covered all of our closing costs with some principal reduction and cash back as well.

(money owed), how long do funds get tied up for?

This would be doing a subject to and then renting it to a tenant buyer that could possibly put down the amount of back payments owed as a down payment.  

You would get your principal and interest, but the new investor now holds the lien for both years and can foreclose if the owner does not pay.

Regardless if the home is sold 5k or 500k under what is owed to the bank, the seller generally gets nothing. 

I've thought of something along the lines of paying him the back taxes owed + penalties (~2k) as a "down payment" and making payments from there with whatever terms.As he is a realtor, I'm sure he knows the tools and tricks of the trade. 

"A broker may not take net listings unless the principal requires a net listing and the principal appears to be familiar with current market values of real property.