It was held by the previous owner for a very long time, so I wouldn't be surprised if some basic facts about the house are incorrect.I was making an offer on a house a couple years ago and discovered that the owner was paying taxes on an additional house that was on the neighbors lot and didn't know it!

We’re fortunate to have an above-average income and live well below our means.This summer, we’ll be moving to Detroit (PCSing in August), and we’ve saved about $120,000 to invest in addition to having funds set aside for the home we’ll purchase in Detroit.The reason I’m posting is that I’m struggling to decide how to best allocate the $120k.

Any additional will be refunded a few weeks after the auction. 

You're also able to work with the utility company to install an additional meter.

Also there is an additional tax on the returns due to the financing. 

@Edgar Duarte Selling now under the primary residence exclusion avoids capital gains taxes, allowing you to reinvest the $500K equity in diversified assets like index funds or additional rental properties.

In addition, if this was originally an owner occupied house, there are often homestead exemptions where the first  $XX,XXX. of the value of the home aren't taxed.  

These are professionals with additional training and a stricter code of ethics.

Generally, a loss can only be claimed in the tax year when the investment becomes completely worthless or when there is a final determination that no further value will be recovered.If the REIT has officially liquidated, been declared insolvent, or issued a final report confirming that no additional distributions will be made, you may be able to claim the loss on your 2024 tax return.

In addition to the different tracks @Chris Seveney descrubed, there is also good information on creative financing and seller financing (including what to avoid).