Typically, I've used the 70% MAO rule, but given the current market conditions, I'm wondering if adjusting this rule to 80% is more appropriate? 

We generally categorize people suffering from this type of condition,  as being insane.

You can't get inside to view the units, so you can't confirm or deny the condition of the property or it's value.If it were me, I would find a way to take control of the situation.

They do not add more for garage, basement extra storage, central air conditioning etc, which are market rent additives. 

Or, should I accept with conditions if one or more applicants do not meet the minimum credit score?

I will get the Title V inspection done to know the current condition of it and then decide.

You can use a lease extension agreement to renew all of the same terms and conditions of the original lease but with new lease term dates (from new lease date to new end lease date).

So the implied proposition is, "Buy this run-down house... pay ALL the closing costs (often both sides of the transaction) to buy it, invest a significant amount of money, sweat and tears to bring it up to market condition, then sell it while covering your typical closing costs as well, and your spread to do this is max $50,000 according to their ARV.  

It depends on the terms and conditions of your application (hopefully you presented a formal offer to lease that provided for forfeiture of deposit if the tenant failed to take possession).

They can take time with their search and be more selective about a property’s location and condition.