The tenants are smokers, have a record, and are possibly getting a dog (through some type of disability program) even though their current lease says 0 pets. 

Just last year, Forbes Magazine examined pet friendly rentals in the top 25 markets, and determined that Seattle’s pet friendly rental market is the second best in the US.

They originally said they were sand fleas, but the exterminator called me today after inspecting the house and told me they were pet fleas.

It's safe for humans and pets when dry.  

I put it on the market at $515 and it's now being rented at $615 as the tenant has a washer/dryer and pets.

should pet be allowed for rental? 

Remember, with pet odors replace what you can, but oil-based Kilz is your friend.   

For this size apartment,, 4 people in a 600 sq ft apt,, would be like packed like sardines..I always set my occupancy well below the standard.. my 1 bedrooms were limited to single person occupancy..2br's 2 people,, studio's 1 person.. and no pets..and no smoking.. 

I would recommend you start by downloading your landlord tenant laws for your state..Then set your rental criteria,, credit score, income, (= to 2 or 3 time the rent ), occupancy limit per bedroom size of apartment... no cosigners,No pets,, no smoking,, what ever..but it stays the same for everyone.. 

Did not charge for damage to new kitchen drawer, damaged doors, or replacement of pet damaged carpeting.