from my reading of the OP, the former owner has the right to redeem. So, if the owner coughs up the water bill plus $900K plus interest on the mortgage, he/she could redeem the property. If that were to happen, your $100K might be wiped out. Most likely, the chances of that happening are slim. On first blush, it appears that you "might" be able to obtain a nice piece of property for well under market value.

However, with the complexity of this deal, it might be a good idea to run it past two or three real estate professionals. Plus, an EXHAUSTIVE title search would be in order to uncover any other liens, levies, etc etc that might not be readily apparent. And, as Hatterasguy says and depending on the state, the bank may pursue the $900K through foreclosure proceedings as well as pursuing the original borrower. The fact that the title insurance company won't offer title insurance until the redemption period is over would give me pause.......

There is safety in many counselors.