The foundation problems happen in the DFW area when the soil is not kept at a constant moisture content. 

Also, how long should such contingency funds be held and should they bear interest? 

So many factors can affect a parcel's value including topography, soil quality, zoning, history, utility access, road access, shape, etc.

Well, at first glance it appears to be human excrement, BUT the bowl on top of the tank indicates that a person has "created" a mess by filling the toilet and mounding it up with soil from the backyard, which explains the bowl used to transport it into the house.  

Also, ask the neighbors (if there is any) about the soil.

I mean you can't just up and move your farm, the well you dug, the soil you improved, etc...

This even older thread comes to the conclusion that using his method will result in having to sell for about 10% below what the market should bear.

My question is, does the tenant bear any responsibility for this?

I Highly recommend asking if he has any soils reports, surveys and any engineering reports for the property.

These individuals have money in low-interest bearing accounts, but prefer higher returns.