Possible Short Sale

What my partner had to say about it...
SFH. Brick, 4BR/2.5BA. In ground pool. Landscaped. Whirlpool tub. 3 stories. Newer roof. Newer kitchen. All appliances in kitchen.

I sent this lady a pre-foreclosure letter a few months ago.
She called and said she had a buyer, but they couldn't buy right away.
She needed $12,000 to catch up with the lender, including fees.
I suggested she lease/option the home to the buyer for a $12,000 option fee.

About 2 months later, she called me again.
The lease/option fell through.
She needed to sell, and wanted to avoid foreclosure.
Was I still interested?

She bought the place in March 2004 for $164,000.
She has it listed for $179,000.
She did get some minor flooding through floor drains during 2006 flood.

I tried to do comps.
There is nothing similar in the area.
The place across the street is under contract at $124,900.
It is wood sided, 3/1.5.
Nowhere near as nice.
Realtor had the same problem.

Seller is divorced recently.
Two judgments against her for $48,000.
Shoud be cleared by her bankruptcy.

Financing was 100% VA Loan at 5.25%.
Has assumability clause.
I offered $127,045 with contingencies:
100% Assumable loan to me.
No more than $8,000 in flood damage.
Attorney review of bankruptcy filing.

She has signed contract at that price.
I start dealings with the lender on Monday.
We'll see how this one works.

I plan to fix and flip this one.
My gut feel says I can sell for $160-$175,000 with no big trouble.
Of course, I've been wrong before.