So, a fist hole in drywall would be damage, but a chair rubbing against a wall and leaving a mark would be normal wear and tear.

It's not only inspiring to see what is being done but also opening my mind to how I could make a business plan that incorporates both sides.

Just a thought, though - would it behoove you somehow to refinance your mortgage and incorporate the second mortgage into it?  

Our lawyer already had a lease incorporating lessons they have learned from 25 years in the local market, plus we were able to provide input to add a few things we wanted in there.

I do regret asking the questions the way I did without thinking too much of it because the tenant seemed very focused and motivated to rent the property, I thought it wouldn't be a big deal but boy was I wrong, people are very unique.I will definetly incorporate Sue's question into my applications in the future.

One knows the construction of buildings.An appraiser may incorporate an inspection report in his findings, but I never saw an appraiser in a business suit crawl under a crawlspace in a house.Maybe things like that were happening during the insane bubble, but I'd bet they went back to their more conservative ways.  

Deep chair / table scratches in another area.

There was multiple chairs around in the bedroom and it leads me to believe an all night binger was going on.

If you allow your tenants to write whatever they want on the checklist, do you also agree to incorporate their findings as part of the move-in condition of the house?

So yes draft addendum incorporating the rent raise  and any other addendums you feel are needed.