Brooklyn Foreclosure - Potential Red Flags?

Question

I am strongly considering a foreclosure property located in Brooklyn. It has been on the market for three months, with the price reduced multiple times from $550,000 to the current $375,000. The property is being sold by the bank. I understand that some prospective buyers have gotten under contract but later backed out. According to the brokerage and agent, these individuals either weren’t serious or claimed they didn’t realize the property was occupied, even though it was clearly stated in the listing.

I’m not particularly concerned about the property’s condition or the eviction process, as I’ve already secured some level of cooperation and have basic access to the basement. Additionally, I am financially prepared to sustain hard money loan payments for up to two years, which is realistic for resolving occupancy issues in NYC. The property is a duplex with an ARV (after repair value) of $700,000, making it a strong deal.

However, I want to ensure I’m not overlooking any potential red flags. While I understand that other liens are typically foreclosed out, could I be missing something? Additionally, the repeated price reductions might signal broader investor hesitation, hidden repair needs, or structural issues. Could there be something I’m not aware of that’s keeping other buyers away despite the attractive pricing?

Isadore Nelson · Answer

Are you responsible for any transfer taxes upon sale? I could take responsibility for back taxes if needed - it wouldn’t hurt the deal.

Any violations, open permits, etc.? From my research online, there haven’t been any recent violations. Previous issues that were reported were relatively minor and were addressed a few years ago, so there’s nothing outstanding in that regard.

Some title or certificate of occupancy issues can cost tens of thousands to six figures to resolve. This might be my key question, as eviction itself doesn’t worry me as much as the potential hassle it might bring. What sort of issues are we concerned about? What info might I be missing?

Buyers may be backing out due to failure to obtain financing for the deal. Other reasons could be related to title or physical defects (e.g., foundation issues). I’ve gained access to the basement and didn’t detect any foundation issues. I know that me gaining access was totally an exception, there's no way they all did, if any. And it is not like you can swing around the back sorta property.

Mohammed Rahman · Answer

Hey @Isadore Nelson - I'd bet my life savings on the fact that there's multiple reasons why other investors haven't scooped this up yet.

Keep in mind, most offmarket/distressed deals are traded offmarket before they even hit the auction block. If it's made publicly available, understand that most investors have already passed on it.

Does it mean its a bad deal? Not at all. A bad deal to one, is a good deal to someone else.

I'm pretty active in Brooklyn and have closed multiple multifamily buildings, with the most recent happening a few days ago 11/26 @ $1.55M.

Shoot me a text or DM and I can give my $0.02 on it after reviewing the deal - thanks and good luck to you!

Abel Curiel · Answer

@Isadore Nelson

Are you responsible for any transfer taxes upon sale? Any violations, open permits, etc.?

Some title/ certificate of occupancy issues can cost $10,000’s-6 figures to resolve.

Buyers may be backing out for failure to obtain financing for the deal. Other reasons could be related to title or physical defects (i.e. foundation issues).

Brooklyn Foreclosure - Potential Red Flags?

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