Upside Down Owner: Offer Lease Option?

[Erich Berry]

Here's the skinny:

I met a retired Major whose job is relocating her in August and she wants to sell her house. Problem is she owes $213k on a VA loan and the highest comps are $200k and below. I'm brainstorming the best strategy and I came up with wholesaling a lease option; here's my fuzzy logic:

$200k contract

3 yr option

Tenant-buyer pays $205k - $212k 

Low-balling appreciation at 2%, the value should be somewhere around $212k creating a small spread for her to sell and walk away with a little cash.  The balance should be somewhere in the high $170s come 2018.

Some tidbits - house is in Lancaster, CA with heavy supply and she's got it listed at $70k over comps value.  Market rents are somewhere near $1300.

DOES THIS WORK OR AM I OUT OF MY MIND?

Thanks for any and all feedback