eBay refunded him in full before he even returned the item.
@good.sound.br
Generally speaking, if a buyer just "messages you" about a condition issue, they have to file a case to start the return process. That is especially true if they want YOU to be responsible for return shipping. You just saying "ok, return it" is meaningless. The buyer must start a return case in order to get the process going.
At that point, you are required to accept the return, and have eBay (or you independently) provide a return label. If your buyer was out of the US, and you shipped directly, you can't buy a label and you are supposed to send them MONEY (usually through PayPal) to fund that return.
If you do not respond to that case, the buyer can return on day 4, ask eBay to step in and help (aka escalate the case). If no action has been taken by you, then eBay may decide to refund the buyer from your proceeds and let them keep the product for free.
That said, if your buyer sent the item back, they are free to use their own label. They can also use that label (or tweak the one you provided) to ship a cheap trinket in your zipcode that will satisfy the eBay bot program that they returned the product. You usually get some notice of this "tracking says delivered" and you lose anyway, but there is often hope for that situation.
From your post, it appears that you did not respond to the case and issue a return label, thus your case timed out without action from you. If your buyer filed a Payment Dispute (aka chargeback) that is a different story altogether.
In addition, there was once a setting or preference that a seller could choose to "automatically refund a buyer under a specified amount". Since I don't sell here anymore, I don't know if that option is still active or even where to look for it. Search was useless, but you can check your own preferences.
