His claims of punitive damages don't make any sense, but I'm still concerned about what a courtroom might say.Any advice/suggestions would be greatly appreciated.

Don't be discouraged, you have plenty of time to find a reputable co. that charges a reasonable price.

Even if they don't exercise their right to buy, you keep the option consideration and you don't have the usual landlord hassles of tenants damaging property or calling you to fix things since they have "skin in the game."

(i) Should it be in DE because of its reputation for a very LLC/Business friendly atmosphere even if the property is not in DE.

When it finally all does start to fall apart you are going to end up being the one that gets the bad reputation and known as someone who "misses things" and "can't get the client to the closing table".

Also, some state, including PA and MA require the accounts are open local and/or in interested bearing accounts.If you were in MA and didn't follow this law (and all its other requirements), the tenant can sue you for treble damages......so if you accepted $1200 that would be $3600 you would owe the tenant by court order!

When we get a direct hit on Miami, from a Hurricane, none of them will have enough savings to cover the damages.

Sewer backup causes thousands of damage, and smelled real great too.10. 

Yes we can, but if the damage is significant, it costs us about $2,000 to do this for a two-bedroom, one bath unit.

I always ask the seller what they are expecting to walk away from closing before i make an offer and i always ask them to disclose the damages that the property may have.