This is where I seem to struggle.

If I understand you correctly, this is a simple seller-carry situation.

I suppose if we had hundreds of loans out, this would be impractical.

I believe many people in this forum have never bought a tax lien certificate at an auction.

This book has great information on how to evaluate deals and will tell you about the metrics you are asking.

There's great advice in this thread already.

That would probably be a good market for something like this.

I think it's fair to say it's beyond normal wear and tear, but I'm not sure how much is fair to say "I'm going to have to deal with this somehow, and because of the scratches I'm deducting x." 

Have helped multiple clients maximize their house hacking properties this year as well. 

Is this a single-family home or a multi-unit?