Thankfully, my brother owns an excavating business and he'll be doing significant dirt work to alleviate this issue-he said that since the water would come and go and dried in between rainstorms that there is no significant water damage to the house or foundation, but the siding all around has taken a hit.

Agree with @Christopher Phillips,Don't pay attention to ANY hairline cracks, meaning 1/8" of an inch or less, specially if they are on plaster or gypsum boards/dry walls.  

Yes we have very hot and dry summers.

Large boulders, dry riverbed, mini-canyon, cacti, drastic elevation changes?

Just gotta hustle a little harder when deals dry up.

Food for Thought- Gordon Moss spoke at Paper Source Symposium last week from a 20/20 hind sight , the paraphrase comment was - Instead of taking so many hair cuts on commissions , I should have taken a percentage of the equity / property when asked to take a haircut. 

If it were cut and dry the answer may be yes.

Turns out, they have bid on this job before and had concerns about dry rot and construction.  

I just don't think its a cut and dry decision to make.For what its worth - I will not allow my parents to touch a dollar of what's to be paid back.

Either way you can sell the note on a secondary market but expect a hair cut unless it's high yield.