I don’t think you are “in contract” until the earnest money is deposited. 

Under New York law, landlords have 14 days after the tenant vacates the property to either return the full security deposit or provide an itemized statement indicating any deductions made from the deposit.If the landlord deducts any expenses from the security deposit, they must provide the tenant with an itemized list detailing each deduction and the corresponding cost.

Keep their deposit and take them to small claims for the rest of it.

So buyer brings more money to the table . 

security deposit are the tenants, not the owners.

The security deposit would be applied to any monies owed and a letter would be sent within 30 days to the tenant. 

I would advertise and re-rent the unit and retain that part of the security deposit not used to offset the lost rent.

What is a reasonable Pet Deposit and Pet Rent for a well trained dog of 50Lbs in San Diego?

You will receive the security deposit in Checking but then transfer it to Savings.

First of all- the security deposit isn't "yours," but it isn't the PMs, either.