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Refund for a Return Due to Incorrect Address

I recently had an item returned to me by the Post Office because the address provided by the buyer was incorrect. I'm not exactly sure how to issue a refund or relist this.

 

I don't believe I should be responsible for the shipping, but if I deduct that from the refund, then the fee credits will be affected.  Also, I'm not sure how to sell this again to the same buyer (with an updated address). Was thinking I could list it with a high price and tell the buyer to make an offer for the original amount. Not sure if that's acceptable.

 

Been going through all the eBay help stuff and this issue doesn't seem to be addressed.

Any help would be greatly appreciated.

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