Have no basis for this assumption to be honest.

My assumption is the appraisal will be completed ‘as is’ and therefore will reflect current market value of the 3/1, 1000sf sfr.

Your assumption is broad and erroneous, it would appear you have misunderstood my posts above.It is a good thing that we have the field to conduct our businesses - real estate and non-real estate alike as we see fit.  

Are my assumptions correct on that on how the interest is paid?

I think that you need to look at the actual neighborhood and learn the particulars, instead of making assumptions based on statistics.

So his assumption is we can’t do anything but sue us.

As for my parents, yes they can take out a HELOC which is the plan and the reason they offered us ~4% return, but they made the offer with the assumption that our house money was not tied up in the stock market, and was sitting safely in the bank.Had the stock market been volatile and we cashed out of the stock market and had the cash in the bank, I'd say the 4% isn't a bad offer.

Other than the really crazy crash of 08 in spots 25-30% if a health downturn assumption.  

Upcharging I view as charging additional for work that was not clear within a contract.I write a very specific scope of work which includes assumptions the contractor is to follow.

@Sam Shueh I agree with your assumption of the value of the carpet was 50% is that what you are suggesting to charge the tenant for cost replacement?