no one will insure this foreclosed on house that is occupied so why and what to do?

loooong story.

I want to bid on a foreclosed on home. The occupant is the previous owner. The auction is April 5th and 5% down would have to be paid and the rest within 20 days and until closing, Wells Fargo has the house insured. I need vandalism and fire by vandalism from the date I would own it until the occupant is out. The lawyer who did the updated title search for me said do not bid if you are worried about vandalism, and a real estate agent who tried to talk to the occupant to get me in there through a short sale to stop the auction was unsucessful in talking to the occupant because the occupant is in denial about her inability to keep the home and the result of next week's auction. This agent said let the bank buy it at the auction and then when they list it with an MSL, then go for it. The tax value is $65,200 and the debt owed Wells Fargo is $38,654. No one knows how the bidding will go but if the bank gets it for $38654, I doubt it is listed later under $55,000 which leaves me out. The idea of getting it for $39,000 through the auction or less than that through a short sale are compelling. The problem is no one will insure my cost to buy the house which will be $38,654, maybe a little higher, all dependent on the bank's opening bid and their final bid, and who else is interested in this house.

I knew Foremost wrote some specialty policies so I called them. They told me the names of two independent agents. I went to the first one and got a dwelling fire one/basics one, protection class 9, occupancy: vacant for $2695 a year. I need coverage for maybe 3 weeks.

It was insured for $70,000. I asked what does the policy pay me on a $10,000 loss and they said $10,000. I asked what does the policy pay on a total loss and they said $70,000. I went on to the 2nd agent to compare quotes. Also, I noticed on the $70,000 policy it said "vacant" when they were specifically told the house will be occupied by the previous owner. On to the 2nd agent and they called Foremost. Foremost said the $70,000 policy would not have paid a penny on fire and vandalism which is what I needed. If I had taken that policy and had a claim denied I would have had to sue the agency that gave me a worthless policy. The 2nd agent, over a period of 30 minutes after I left, called me and said "Foremost, American Modern and American Reliable don't have a policy for you". I went to a pay phone and called Foremost directly. Their application process was long and many questions. I can not inspect the property so there were some questions I could not answer. Such as existence of a space heater or a smoke alarm. The pay phone timed out after 12 minutes and this happened 3 times. However, I was able to talk to the same agent on all 3 calls. On the 2nd call they said their underwriters would do the policy. On the 3rd call they said no. All because I could not give an accurate answer on smoke alarm or space heater.

So, I had a DP1 "tenant" protection class C quote from another agent through Scottsdale. They were insuring my cost to buy the home which would be around $40,000 knowing I would not rebuild if a total loss, and everyone knew $40,000 would not rebuild any way. The premium was only $39 a month, almost hard to believe. I later went back and inquired more about this policy and the phone person-agent who gave me the quote got a little huffy puffy because I was questioning the quote. She again said it covered vandalism and fire. So, I go to another independent agent and say I heard Scottsdale might have a policy for my situation. They worked with several other companies. After the agent took all my info and talked to the staff today he called and said he could not insure it as there were too many unknowns. I told him what I had heard that an occupant, whether a rent paying tenant, or a non rent paying relative, or me offering free housing for the homeless, whatever, an occupant of any kind would be a "tenant" policy. As I was thinking about it, will my occupant be more likely to damage the place than a paying tenant that has to be evicted? It seems to me, not much more likely. Any occupant who is not the owner could have to be evicted and could do vandalism.

So, I went to an adjacent town and went to the same agency that had quoted me the $40,000 policy through Scottsdale. Not the same agent but the same agency just a different location. I went in there saying I heard Scottsdale might be the company to help me. I knew this because of the previous quote through Scottsdale. This agent said he was not comfortable writing the policy. He said he wanted to write it as a vacant, despite there being an occupant. I think he said it was because the occupant did not have a lease with me, so he suggested a flat policy and labelled as vacant. I asked well, if there is claim for damage caused by the occupant, will a vacant policy pay the claim? I got a shaky answer. Then I said, what is Scottsdales definition of a "tenant"? He did not know. They I s