We prefer tenants to realize this is strictly for damages and not to be confused with last months rent at move out. 

After inspection, we discover there's drywood termite damage, moisture/water leaks seen from the attic and ceiling, roof doesn't have a permit with old patches.

The carpets are damaged as well.

Staying sharp with courses or classes not only helps you stay out of trouble but also shows you’re serious about being fair.Ask the Experts: When you're not sure what to do, talking to a lawyer who knows about real estate can really help calm your nerves and make sure you're doing everything right.Use Smart Tools: Think about using a service that checks tenants for you.

You would want cash replacement for downtime due to damage.

The penalties seem harsh and I wonder if those will adjust, but they put in things for plumbing out, property damage etc

When viewing potential purchases pay attention to any damage such as cracks, leaks or structural issues; you may want to hire a professional inspector for extra assurance.

-Has no crawlspace (common for older properties) so we couldn't see the foundation-Drywood termite/wood decaying fungi damage seen on all the windows/doors/parts of the beam on the exterior, parts of roof decking and rafters in the attic-Old leaks/moisture damage seen in the ceilings and attic-Parts of the roof has patch work-Roof doesn't have any permits on record (don't know how old it is)Seller's offer to me:-Fumigation treatment for drywood termites (tenting the house)-Replace and repair all damage wood throughout the house-Replace the entire roof with a new permit-Replace one window in every room (not all)-Pay for a structural engineer to inspect the foundation-Offer to get quotes for repairs and have a 15-20K budget to make all repairs, house is 500K.

We then have an umbrella policy for additional coverage and I add damage protection to all of my reservations for additional coverage. 

Stronger structure for tornados and wind damage, less wood for termites.