BiggerPockets

A alternative solution maybe to approach the bank mortgage department especially if it is a local bank and ask about buying the debt out at .10-.20 cents on a dollar. The bank benefits as they won't have to get their getting money out over a period of time and you benefit as you are able to get the lots cheaper. Now this is contingent if you have the capital to take out the banks debt in one lump sump.

"Rather than cutting their losses they decided to double down and finish the development."

If their loan was non-recourse with no personal guarantee that was probably a bad mistake.

Do they have any other properties they own pledged as security for this land they are developing??

There is also the tax issues of the forgiven debt from the write down they would need to discuss with their CPA or tax attorney.

FIRST is to find out who is holding this loan (local,regional,national,etc.)

They will all look at it differently based on a ton of factors.You have to talk to the decision maker on the file and see where they are at with it.

I am sure the bank wants one thing in a perfect world and the sellers want another and you have to see if they can meet in the middle.