Should they not heed your warning, you can notify any smoking damage will be taken out of the deposit. 

The property manager warns me that I might loose the tenant if I do this, and that my house is not so easy to rent out. 

.- The 10X Rule: warning, do not venture into this book unless you are ready to start taking action - whenever I need a little motivation, this is the book I dive into.

Just a warning eat before you go the food is kinda terrible.It's so strange but many investors I've come across in NY dont follow BP some dont even know it exists.  

Any ideas, thoughts, caveats, straight up warnings? 

A bankruptcy filing doesn’t negate a foreclosure...it only stalls it for a couple of months.If someone buys at a foreclosure auction Without knowing they are buying from a second mtg foreclosure, and are at risk of the first mortgage foreclosing, they have no business buying through a Legal Action against someone else.....they should stick to safe, normal transactions.And so that everyone knows....when you bid online at any FL foreclosure auctions, you have to acknowledge several warnings that these properties may not have clear title, there are risks involved and that you should consult an attorney if you don’t know what you’re doing.

Unfortunately you ignored a warning sign and broke a rule of thumb on top.

We allow our borrowers to choose their GC but prefer that they've had experience with them and warn them about the importance that they trust them.

Thank you for the warnings on possible scenarios @Jeff S., I know you are a very seasoned lender and I appreciate your advice.It does look like the borrower is going to be able to finish the flip after all, albeit well past our contract due date but I would rather it go this way than have to take the house back and finish it myself.

I feel like I should warn you that since the real estate crash ten years ago, the market has run back up to a high valuation.