I feel for you as that is a huge amount of money to be out of pocket, it doesn't seem right that ebay won't refund the fees.

There are a couple of things I would like clarified.

First off, is it compulsory to offer paypal as one option, are you able to say cash on pick up only?

If I were picking up, I would be fine with cash sale only, but I was just wondering about the ebay ruling on it, that's all.

Secondly, what could you have done to avoid this? Should you have suggested a cancellation and waited for him to respond to ebay and agree to it, before refunding the money (after telling him that was how you were going to work it).

It's been years since I sold on ebay and a lot has changed, so i would be interested in knowing so I don't make mistakes if I do sell again.