However, "tenant" (prior owner, or new occupant), has personal property damage.

To alleviate your fear, use a Purchase and Sales Agreement that states that your earnest money is full liquidated damages if you the buyer do not perform.

The investors who over leveraged their portfolio are the ones in deep trouble, can’t sell and are damaging their credit.

I can't speak to fungus but *every* property in California has termites, at least on the coast, so depending on part of the country and extent of damage, that's not necessarily a reason to run.

In Mass it's actually a law that you cannot accept more than 33% of the contract as a deposit if you're a home improvement contractor.Good call with the required W-9 and the insurance certificates before they start any physical work.

If the owner of the fenced property put up a straight line fence from the side of your subject in both directions, I'd say they abandoned the 3' to the front and rear of the house as well as the physical encroachment, you'' be taking that later on depending when they put up the fence.

Would that stick out like a sore thumb and severely damage our sale price if we leave that out?

Current market value February 2014, $105,000 due to physical condition and required rehab.

Damage caused by tenant?

The damages awarded against you can be large.It might surprise people to know that my commercial clients buying larger apartment buildings that the utilities are number one on the concern list.