"but do i have to refund this"
** My opinion: Yes.
Here is why:
Your ebay post says, "WE OFFER A MONEY BACK GUARANTEE IF YOU ARE NOT COMPLETELY SATISFIED ON MOST ITEMS SEE ITEM"
There is nothing in the text of your post itself to show that this item is excluded from your guarantee, and therefore, the risk of misinterpretation falls on you.
If this item was NOT covered under the warranty, you had an obligation to say so.... or to not put the claim in the ad.
My suggestion:
Contact the seller and negotiate a split of escrow fees (if he/she refuses, you pay them). You send your payment to the escrow firm. Have buyer send item to you. You inspect item. If as shipped, escrow firm releases payment. Do NOT do it any other way.... far too much risk of being scammed.