Seller changed mind after payment

[poppyhenry23458]

I recently purchased a ring and paid within minutes of the end of auction. The ring has been listed and 'sold' previously by the same seller - I know this as I previously watched then item and didn't bid. This morning I received a message from the seller stating that the ring was no longer for sale, essentially because the seller has had a change of mind. They have now sent a cancellation of transaction through claiming that I purchased the item in error. I am thinking they just want more money.

What happens if I don't agree to cancel the transaction? I haven't actually received a refund yet, although the seller claims to have refunded via PayPal. Obviously I won't be agreeing to anything before a refund shows in my account, but I actually still want this ring.