Sounds like you hired a scumbag. Will the second holder settle for $5k on $50k - probably not. They might be wise to since they are likely to get zero, but "banks" and "wise" aren't in the same sentence too often recently. Frankly, the chance of a short sale working with 2 lenders involved is pretty slim. Will the lender foreclose? Eventually. You lawyer is probably right that it will take a while though. His advice about renting the house is incredibly unethical. Fortunately, recent laws protect the renters from your unethical behavior. Even if the property is foreclosed on, the new owners are bound by the 6 month lease. The current tenants cannot be evicted as long as they make payments. At this point, your best bet is to contact the National Foundation of Credit Counseling. That is the real, legit public service group - not one of the infomercial people. They have links on their site for finding a certified counselor in your area. I'm sure they will tell you to drop this bozo lawyer and to start making realistic plans to improve your financial situation. Here is a link that might be useful: NFCC

Tell the owners you are buying from your contract is going to be withdrawn since the property is no longer in the same condition. Put it in writing from your attorney. CC the lender. Be prepared to walk away. Water damage is insidious and expensive to mediates if it is prolonged. Major leaks wreck flooring almost as fast as they stain ceilings. Your best deal might be to withdraw, wait till the place is foreclosed, becomes REO, and then get a bargain based on the damage that will have occurred. If you can do the tear out and clean up yourself, and at least some of the repair it could still be a good deal. This type of house can easily become a money pit that will cost more to repair to habitable condition than it is worth. It will then be a 'knock down' for the land value only. Proceed accordingly. This is a business deal, so leave the emotions at the door. Be prepared to walk away.

I'm sorry to hear you're in such a mess. No doubt it's a scary situation to be in. Have you checked your Lawyers references? I used work with foreclosures, and depending on what state you are in, it can take that long for the foreclosure process to follow it's course. Requirements by lenders vary depending on what lender you have and who the investor on the loan is. I know when foreclosure rates started rising nationwide, many of the larger lenders were telling it's borrowers that a 3 month deliquency was required, but I believe that due to the shear volume many have changed their position in that matter and are negotiating Short Sales as quickly as they can. I do several property inspections per week for them in my area alone and have heard the banks are completely overwhelmed with the volume. Just so you know, it's not actually the lenders you speak with on the phone that make those requirements. Typically, borrowers only speak with the servicing provider for the loan and that servicer is obligated to follow it's investors guidelines sometimes insurers like HUD are calling the shots depending on how far into the process the foreclosure proceedings are. I'm not so sure about the advise regarding the property managers, can't comment on that except I'd want to know the logic behind it before following it! I'd also make sure I understood what my liabilities are contracturally in the event of a successful short sale. Basically, you want to make sure that your leasor cannot hold you liable for moving expenses or the like or that the lease protects the leasor from having to move if he/she is paying their rent in a timely manner. If you do ask them to move, I'd be prepared for some trouble, I don't know anyone who would be happy to find out they have to moving from a place they just paid a good chunk of change to live in before their lease expires. Depending on where you live, I'm also wondering if you have a legal responsibilility to disclose to a potential renter as well. Lawyers just like Realtors are bound to follow certain guidelines or laws to protect their clients best interests. I'm not a lawyer, I'm a Realtor, so I don't know off hand what their specific guidelines are called, but I'm sure they exist and you could easily find out what they are by calling the Legal Board, who also maybe able to better advise you. After hiring a Lawyer, people tend to forget that he/she works for you, and you have the right to know and understand what is taking place. Don't allow the fact that he/she is a Lawyer intimidate you. Write your questions down, meet with him and insist on answers. If he doesn't accept your calls, let his secretary know you have made several attempts to contact him and your prepared to call the Legal Board to file a complaint if he doesn't call you within 24 hours. If you are able to meet with him, in addition to questions, if he hasn't already cc'd you on correspondence with your lender, I'd ask him to provide you with copies and all the names of people he's spoken with for your file. Let him know he cannot just take your money and do nothing. If answers to your questions don't make sense to you seek a second opinion. (Regardless, at this point, I'd probably get a second opinion anyway, by a professional in your area who is familiar with your market and the lending laws of your state.) I also recommend that you get in touch with your lender(s) and try to speak with someone in the asset management department. Every week costs them money, the longer you wait to discuss your circumstances with them and try to negotiate with them, the harder it will be. Unfortunately, in the end, as the owner of the home, you are responsible and will be held accountable financially even when misadvised so you need to get busy and do what ever it takes to protect your interests. I hope this makes sense and helps. Good Luck!

I'm working on a proposed short sale with B of A right now, & the only advice I can give you is: 1. Be patient. 2. Put everything in writing, & put the loan number on every single page you fax to them. I wish you the best.