I paid a deposit of $12k to the architect and $2400 to the surveyor.

At signing of the lease, I got first month rent, last month rent and security deposit (equal to one month rent).

I expected a 20% not 70% increase The demand is still there.. and end users are buying these assignments because they want to move into a brand new condo now and not in 4 years..For example there is a 2 bed condo selling for $800k.. it was purchased in 2016 for $500k.. the deposits added up to 20% $100kSo for someone to buy that contract they need to pay the original buyer $400k cash...The remaining $400k will be required at occupancy closing..End users are paying this today.. 

Realistically, I only put down my original $5,000 in earnest money and at closing I received $5,662 (excluding $3,950 in security deposits) since I used my commission as a down payment on this deal.

She can leave on good terms and get a deposit back or she can make it difficult and expensive for both parties.You'll have to toughen up if you want to be successful as a Landlord.

I have not done a deal like this before and I wan to be sure I'm not waking myself into ta trap by trying to save on the deposit. 

Is it going to be more expensive than the damage deposit?

I am assuming the fees are small.Presumably, you have a security deposit. 

You want to make sure if you are billing back the tenant in a sfh that you get a deposit for water or you'll be holding the bag when they move.

As far as backing out yes you can request your Escrow deposit back during the inspection period for any reason you deem fit, many individuals will say it is a free look however professionally that not the best description since it is not free, with any due diligence you invest in inspections and other professional services to answer as many unknowns as possible to remove as much risk as you can prior to purchase.