@Jason Merchey - You can't use the last month's rent for anything other than last month's rent (for example, it can't go towards damages upon move-out), so I'd only ask for first month's rent and the security deposit.

. $100.00Laundry room 7‘ x 7‘ Water damage on ceiling and walls.

I would start by talking to your tenant to see if you can negotiate a termination that limits your damages and allows them to move out.

The fire insurer is not entitled, as subrogee, to bring an action against the tenant to recover for amounts paid to the landlord for fire damage to rental premises caused by the tenant’s negligence in absence of express agreement between the landlord and tenant to the contrary.

You have no damages and nothing to gain by pursuing this. 

In your case the 30 day clock has not started so at this point you are not required to do anythingWhen a forwarding address is supplied, provide an itemized list of the deduction and send any funds remaining(if any)If the tenant still owes money for damages a landlord can file a small claims action against the tenant for less than $200. 

There was also some floor damage from water in one unit and carpet that needed replacing in the other unit.

Since they did not willfully damage the property, we decided to give mercy and decline getting a monetary judgment against them. 

And then imagine what sort of damage might be inside. 

And, if something goes wrong with your financing and/or something happens at the property, the seller could claim that you damaged his property, failed to close, and make a monetary demand - or even charge you legally with trespass/more.