You are the first person I have seen speak unfavorably about cash for keys.

However keep in mind you'll probably pay MUCH more in the long run because they tended to offer an unfavorable commission split.I signed on with Keller Williams out here in northern NJ, and they operate through both of our states, so reach out to me if you'd like any information on what that process was like.

As for building your own tiny house, most zoning regulations are unfavorable to tiny houses.

My question is is it better to submit a counteroffer to show HUD that I am still interested in purchasing the property, just not at their price...or do they look at it unfavorably because I am submitting an offer that I know will be rejected?

The current owner is considered unfavorable by most that I have spoken with at the city level.  

It was super easy but terms were a bit unfavorable. 

And who knows what might happen in CA when it comes to confiscatory wealth taxes, burdensome regulations, unfavorable property / landlord rights, etc.  

Ideally where we can recoup our cash after rehab and see some positive cash flow.We have researched Cornwall, the economy & tenant quality seems it may be possible unfavorable?

Anything over 4 units is considered commercial property, so you'll be facing much more unfavorable terms (25+% for a down payment, shorter loan period like >25 years, higher interest rates, potential balloon payment, etc).

I have had clients get under contract at the beginning of a new construction (you pretty much have to go with a new construction/commercially zoned condo or townhome for it to be STR legal), and by the time the construction was finished, the laws had changed unfavorably for their asset.