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. 

Remember that security deposits are for damage and do not cover reasonable wear and tear.

I am no expert but some issues you might want to look out for:- Mold in crawlspace/basement (as well as evidence of running water during storms, we've seen this)- Structural damage/settling (definitely hire an expert on this one)-Improved Electrical/Plumbing (These systems DO have a lifespan and the older systems aren't as reliable as newer ones)- Asbestos Flooring and Tile (Where I am from the removal of this stuff is mandated by law to be done by a licensed professional, no DIY.

Asbestos shingles are fine as long as they aren't damaged (cracked or chipping)2.