1. Why did the buyer ask for a refund?

2. Did the buyer open a dispute?

3. Why did you refund before getting the item back?

4. Did you jump the gun for fear of negative feedback?

Sadly, because you didn't follow the correct procedures, you've lost the money and the item. I would take a guess and say the buyer was wanting a freebie, or they bought to resell, so want to maximise their profit by getting it for nothing.

If number 4 is correct, that's sad. No one should ever lose out for fear of a negative feedback. It is nothing more than a coloured dot on a screen. It is worthless. It's certainly not worth losing money over, that's for sure.