I had a tenant cause a serious plumbing blockage by flushing tampons down the toilet.

Or the alternative, which many people don't think of...if you or your family unfortunately causes a lawsuit to be filed, the personal suit can go after all properties owned in a personal name.It's good that you have friends who are willing to invest with you. 

Offer three might be a low ball with no contingencies for inspections and such, which he wont choose cause its so low.

That's actually one of the things I really like about it cause it's another way to gauge how serious the tenant is or not.

So since they have lived here for 16yrs, there should be some record if trouble was caused during that time.  

There's really no harm in doing so.  

Some put a cap on the amount of security deposit you can collect and whether or not you can collect last month's rent.One reason we don't collect last month's rent has to do with the confusion it causes when it is indeed time for the tenant to move-out.

Often times, especially for young punks, its medical cause they don't have insurance.

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.

The other possible cause for the low list price may be that there was an offer on the property which prompted the bank to order a BPO (Broker Price Opinion) and the valuation came in low so they have listed the price accordingly.