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).

So, if you put in 20K, you could set the bid up to the amount of the 100K total debt(80K existing + 20K additional) to ensure that the property reverts to you as the lender.

In addition to public Service Jesse Brewer is a real estate broker with over 20 years’ experience in dealing with rental properties both as an owner / manager, but also as a broker selling them.

The only reason he did it was because it led to additional work.

Additionally, his credit is not the best, and he has limited funds for a down payment.Any potential options or solutions that may be available?

In our market it is important to make sure they are a licensed broker, carry adequate GL and worker's comp (and name you as additional insured).  

In southern CA, even garage conversion ADU additions are typically costing more than the value added.