Help with Deposit Deductions

[Kris Fox]

I bought a house and inherited a tenant. They moved there in 2004 and they moved out. The carpets are shot and need to be replaced. I obviously have no idea what the condition of the carpets were when they moved in.  Clearly replacing all of the flooring is going to cost more than their $700 deposit.  I've read in Turner's management book about sending them the letter outlining the return of the deposit and any charges you are levying.  I just want to prepare myself when they argue (and they will) for their deposit.

They've left the rest of the place in clean and good condition. Is there anything else I should know when they call asking why I took all of their deposit?  I'll obviously say the carpets needed to be replaced and what do I say if they say something like "That's how they were when we moved in?"

Thanks for the help.

-Kris