I buy & sell on Ebay, with years of experience. Something just doesn't add up here but that's just me. It's not likely that the buyer is a crooked Ebayer...it's real hard to make money when you pay for the goods you bought. It would be nice to hear the other side of the story.
The fact that Ebay is asking you for money likely means that they have examined the listing, the correspondence & investigated the buyers claim & have reimbursed him under their buyer protection policy. You provided them your side of the story & info on the engine switch yet they still paid him??? Just doesn't add up since getting money out of Ebay on a buyer claim is not easy. They don't refund to buyers without a little blood and are in the business of dealing with crooks. Not to say that they couldn't make a mistake but you have to wonder!
Selling merchandise "as is" still has limitations. You must represent the condition of the merchandise & normally do describe it in your listing. If there was any thing wrong with the motor & you failed to disclose then you can't hide behind the "as is" representation. Consumer protection laws, State & Federal cover this under implied warranty. A customer has a right to expect merchandise in good working order unless otherwise represented in writing-that's the basis behind implied warranty.
If he sent you his old blown motor then he was obviously wrong, crooked, whatever. Probably got partial reimbursement from Ebay & kept your other motor to recoup his losses.
In most cases like this the seller refunds the money less shipping & handling charges. With an engine that's a big hit for the buyer since he pays freight both ways. The seller refunds only after satisfactory return of the merchandise, so no risk to the seller. You chose not to do that maybe because of the great price?
I'm just saying that the buyer acted in good faith initially since he needed a motor & sent cash through PayPal. What was said in the listing, the condition of the engine, the buyers side of the story, leave reason for questions in my mind.