Tenant wants to break lease prior to move in

[Amy Shari]

So about two weeks ago I receive a phone call regarding my property from a prospective tenant who is very eager to see it. I tell him that the house is not ready to show and will be ready by the end of the week.
When it is finished I call him back and schedule a showing. He arrives on time, takes off his shoes (new carpeting), strolls around and tells me he really likes it. He fills out the application in his car and offers me $500 in cash to hold the house for him. I turn down his request as I have a uniform application process that I follow with each and every tenant every time in order to eliminate any possibility of even the appearance of discrimination or unfairness.
I take his application and $100 deposit and then go to show the house to the next arriving prospective tenants. Having received his application first I run his credit and call his references getting very decent results for both. After verifying his employment and income at a job he has held for over five years I feel confident in offering the house to him.
He is happy and says that he will meet with me on the weekend (almost four days away) to sign the paperwork and pay deposits, etc. That day comes and he arrives. We go over the lease and I point out any areas that I think are important like the no painting clause, no pets, etc. I then leave him with the lease so he can read it for about five minutes or so. When I walk back in the room he has already signed it and has it closed. I sign both copies take his $1500 in cash and write out a recipt.
At this point, he has handed over $1600.00. $35 went for the back ground check. $850.00 is listed as the security deposit, $715,00 is listed as funds put towards the first month's rent. This information is also all spelled out in the text of the lease as I always include what I receive from a tenant to be pefectly clear. Also, in the lease I list that the remaining amount of rent for the first month of $135.00 is due on August 1st when the lease will commence and will need to be paid in cash or with a money order prior to any keys being handed over. He shakes my hand and leaves.
Four hours later I get a call from him and he has now done a complete 180 degree turn. He is having misgivings, concerns, yada yada. Not a single statement of doubt was spoken in all the time I have been dealing with him. I am confused by the Jekyl and Hyde like behavior and tell him I need to digest what he is saying and that I will call him the next day. He proceeds to call me two more times, I let it go to voicemail because I don't want to have to deal with his begging me to just "rip up the lease."
The next day early in the AM he just shows up at the house. Very unnerving. Tries to convince me to rip up the lease again. I tell him he needs to put his request in writing and mail it to me at my home address because I don't want there to be miscommunication, confusion, or any more changing of his mind. At this point, the guy has me a little freaked out...I really don't want him as a tenant but because of what he has done I have not shown the house for a week after telling him he was approved for it. It is a mere 8 days till the end of the month and the start of his lease....not really enough time to rent out the house to another qualified applicant. Basically he has lost me a month's worth of income.
He mails the letter and I write him back saying that he has two options...fulfill the terms of his one year lease or pay a break lease penalty of one month $850.00 with a forfeiture of his $65 remaining deposit due to his failure to follow through on the transaction after being approved (something he signed a lease addendum about. I explain that I will refund him $650.00....I know, I know....you all would not probably do this however, the truth is I DO NOT want this nutcase in my house....I can just imagine the headaches...for me it is smarter to just get him to sign a lease break agreement....keep the one month's rent to compensate for the money I would have received if he had not done this and allow me to have time to rent it out to someone for Sept 1st. So far, I have not heard back from him. I have stated in the letter that if he doesa not respond to me with his decision by August 1st that I will assume he intends to keep the lease agreement.
My question in this long winded story is if he does not communicate back with me on August 1st because he has not paid the full rent for the first month what should I do? If he shows up I know that he needs to give me the remaining due before he can have the keys. But what if he does not show up? Is it a five day pay or quit notice....my worst fear is that he will try and keep the lease term and will harm the house once he is inside which is why I am giving him what I think is an inexpensive out since my experience is most least break fees are two to three month's rent. Any advice at this point is helpful. By the way the house is in a Northern suburb of Illinois.

Thank you all for your help in advance!