Agree with @Adam Shelley - don't refund the app fee. 

He told me that he promises to sell it to me for our agreed price once he clears out his items. lease with option to buy only last so long in Texas so not an optionSo what other options do I have that will hold up in a legal setting?

So ultimately it comes down to what the buyer and seller are comfortable with and can agree on.  

If you took out a 20 yr mortgage on 145,000 and paid 900 a month, that would work out to be 4.3% I think most people would agree is a great rate to get money at.

If they do, then to close on time you and the seller are very quickly going to have to agree to whatever the lender wants in exchange for being willing to doing an escrow holdback at all, which fancy language aside is basically ransom money in an amount greater than the estimated completion cost, to be released once it's complete (ransoms only work if the thing held ransom is worth more than the thing you want).

I agree with @Eric A. for sure about making sure to keep some extra reserves on hand and factor in a monthly maintenance allocation. unless you're already doing that of course, just wasn't clear.

Yup, I agree that clear communication is key. 

Yes agreed all your expenses are half what they should be .

I agree, improve it now as if you were planning on selling.

@Justin Aguaze thanks for the advice and i agree wholeheartedly.