Owes about $1700 between missing rent and damage/repairs (I've already deducted his security deposit). 

You need to explain what an "option fee" is in your question.If someone purchased an option from you, then the money is yours.If someone has deposited a fee to secure an option, such as a right to purchase dependent on a satisfaction of inspection or engineering report, then the money is not yours.If the money is not yours you might want it held in a title company's escrow account (or an attorney's) with a written escrow agreement describing what the deal is.If you hold the money, and it is not yours, state and federal law might consider you a "fiduciary."

If we have to demand the deposit, as the law says we should do, it says to do it by certified mail.

Offer the security deposit for possession in return.

If you want to consider the amount of her income from a job source for which she is the bookkeeper, better to ask for documentation such as her W-2 or 1099, or their whole tax return from 2016.About the credit accounts from retail outlets.... some folks do that to get an instant discount on a large purchase.

I have no idea what kind of repairs/work will be needed until it is vacant.But yes, you need to check local laws, but you likely can keep the deposit to cover the repairs and such.

On the back of the check they just indicate "For Deposit Only XXXXXXX". 

I take one application at a time, unless they have not put up their holding deposit.

Then when I put it back on market I had to give concessions to get them rented like no security deposit and the rents were about 20% lower than they were in 2007.I'm fine with boom and bust as that's natural.

Such as asking for closing costs to be paid, prorated rents depending on when closing is during the month, getting security deposits, ect.. looking for creative details to include and anything I may not think of that, from simple to complex.