If the incentive to fix and maintain the asset is capped at a political derived (aka arbitrary) figure, investment will continue to decrease.

If you don't pay the money back however, your death benefit is decreased. 

With the damage described, my advice is to wait and watch for price decreases; a contract with "no contingencies" means cash with no inspection period aka "buying it blind." 

Will prices stabilize or decrease?

You can say you will just bill back to the residents, but that's not always feasible in some markets and we know that total water consumption decreases 30+% when residents are responsible for actual amount used not just a fixed bill back.

But from RE side, mostly decreases in office rents/values, and to some extent in rents and values on residential not crazy... tough to call though...

Sometimes rents decrease.

I tend to try and avoid putting earnest money down because it decreases your leverage.

This presumably decreases their risk in deals, but I think this is bank-think in many scenarios.

This reduces their vacancy expense to $0, decreases maintenance costs (most arbitragers agree to fix any damage done by guests), increases rent (most pay a premium), and reduced the number of hours managing the property (aka it's more passive).