What Would You Do?

I have a house that I'm not sure what to do with, but a SS seems to be the thing. The house is really a mess inside, but all cosmetic stuff. For about 2K I could have it looking like new. The problem is that he ows about what it's worth, and is about 9K behind. Here's how it breaks down. 2/1 AVR 115K Needs 2K Owes 109K (9K is from back pmts) He is very motivated, and signed the deed over to my S corp, and a purchase contract (no value in it yet). I know not to record the Deed because it will mess up the SS. Where would you start in such a negotiation? I ws thinking 90K (~80% FMV) It this too aggressive, not enough? The biggest holdup at this point I think is that I didn't catch it in time to file a foreclosure answer. What happens in this case, can the bank automatically set an auction date? Thanks for all the help. Sam