Security Deposit and Wear and Tear

[Michael C.]

We have a SFR in Texas that is ~7 years old now. The carpet and paint were original, with a few small spots on the carpet before the tenant moved in. Those were cleaned after they moved in. Unfortunately I don't have any pictures of the property before they moved in.

They signed for and the lease states they need to return the Inventory and Condition form or the property would be deemed free of damages. They failed to do this, but we never asked for it after the Realtor told them to do it at the lease signing. 

The tenant underpaid their rent by $50/month for 18 months and we never noticed until they moved out. 

The lease has the standard things like returning the property in the condition it was received and having the carpet professionally cleaned.

The tenant moved out and had the property and carpet cleaned, they have receipts. Unfortunately the company they used didn't do a great job and the property was dirty. The walls had black spots and marks on them everywhere in the house.

We told the tenant he isn't getting the security deposit back yet, completed repairs, and then eventually (after 30 days, as work was still ongoing) gave him an itemized list (that we created based on the total bill). 

Our contractor just gave us one price for everything and we transfer the money to him. I didn't have an itemized list of repairs from him, so I created one. The contractor doesn't speak English well and only responds to calls / texts when we have a large job for him.

Our Realtordid take pictures of the house after it was supposedly cleaned (http://imgur.com/a/zxnS6). We spent ~$5500 to repaint most of the house, patch walls, replace damaged blinds, have the carpet cleaned twice to remove stains, and have the house cleaned again. We don't have any itemized receipts, just texts from the contractor giving us the overall price for the job and the bank transfers afterwards.

The tenant is demanding his entire deposit ($3600, minus the ~$900 in unpaid rent) returned, claiming that the damage is normal wear and tear, that we used his deposit to clean up the house to sell it, and is threatening legal action. He has moved several states away and we live several states away from the property as well.

Is this normal wear and tear or is it reasonable to keep the remaining $2700? We have never had any of our properties left in such poor condition. Most of the house had to be repainted, as they made the walls dirty everywhere. The Realtor that did the inspection said that it was in such poor condition that no one would rent it as it was.

Bonus Picture: Condition before it was cleaned the first time: http://i.imgur.com/oWMeKTE.jpg