Possible "Sub To" deal in Fort Worth, TX...

[Scott Nipp]

I have been looking at a possible deal in Lake Country (subdivision in Fort Worth, TX 76179) on a SFR. Here are the specs on the house...

• 3/2/2 single story w/ pool
• Needs only minor touch up and major work or new A/C system. So total rehab ~$6k.
• Current balance: $135,489.57
• Mortgage company: Wells Fargo
• Payments w/ escrow: $1388
• Payments w/o escrow: $760
• Interest rate: 4.750%
• Number of payments left: 326

Now for the complications... The owner has begun a loan modification with Wells Fargo. She has made one payment on this loan modification program and has two more to go. Here are the details after the loan modification...

• Payments w/ escrow: $1317
• Interest rate: 4.250%Term: 360mo

Here are the comps for that neighborhood...

• ARV: $145k but likely higher up to $160k
• Rental: $1400-1600/mo

I'm concerned about this mortgage being with Wells Fargo and them actually executing the DOS clause. This would probably be a deal killer as this would add a huge out of pocket for us in the down payment and closing costs to finance this ourselves. Instead of being about $6-7k out of pocket to obtain control of the property this would jump to upwards of $15k - 30k.
Wells Fargo suggested the possibility of a short sale, which might be a good option if we could get them down low enough. They also said that they would sell the property for the owner if necessary with a "deed in lieu", but the owner was in over her head and I don't think she got much in the way of details here.
Obviously we want to maximize our profit on this deal if there is a deal to be made here, but I'm not sure how to do that. Additionally, I would like to recommend the option for the owner that is going to be best for her in terms of preserving her credit. What would you recommend in this situation?