Paypal issue beware.

In nearly 700 transactions buying and selling, I have been "robbed" 5 times. Either buyer claims item wasn't as described and sent back something different or did even communicate. Each time ebay / paypal ignored the evidence and I was out the money and they billed me for the sale. Most of the time these folks turned out to be apartment renters and reshipping to another country. When I contacted local PDs they were of no practical help. Just not a priority for under resource for their case levels. Being right and pursuing costs the victim more in legal, travel, time and aggravation. Crooks know it. And when you do as I did once, what will you do / achieve? You are out more money or if you confront them in person, someone goes to jail or hospital and it could be you. Not worth all that. In business accounting we had "bad debit" and "uncollected" factored. It's NOT right at all but it is gonna happen because there is more and more opportunity and fewer and fewer people are honest and ethical. There was the Ice Age, the stone age, the age of fire, the bronze age, the industrial age, the information age and increasingly so over the past several decades we have the age of the liar and cheat. I am much slower to upgrade audio gear via online platforms such as ebay and agon and audio marts because reselling on line once safe and pleasant is now dreaded and even to be avoided. Sorry for these developments and folks' losses. Sucks to be a victim but sucks more to dwell and not move on to more positive. Life is short. We can collectively make a difference when we realize and act knowing PayPal and the like will only respond to the economic imperative of a decline in revenues due to a decline in use and advertising. Adjust in ways that work best for your well-being and enjoy the music , your family and friends. Offered with the utmost respect and kind regards. Namaste  

@programmergeek , sorry for your problems but appreciate the thread, which is full of good information and reminders.
I would add two things after reading through the issues posters have described.
First, you cannot overestimate the value of packing something well and going the extra mile to double box, ship on a pallet (when necessary), and generally over-package everything.
Second, there is value in the Audiogon community and feedback system. It is not perfect, but it is something. Whether you are a buyer or seller, seeing the length of time your trading partner has been around here and reading testimonials written about that person by other folks on this site, provides at least a baseline as to whether you want to trade with them or not. Being able to set parameters for those you trade with is also helpful. For example, when buying or selling expensive and/or heavy hard-to-pack and ship items, there is value in dealing with folks who have done this before and are known for taking extra care in packing, shipping through a suitable carrier, insuring, and following-up. This stuff will not prevent occasional problems but it is something folks can look at to safeguard themselves.

So here is what I have learned from this discussion to do business on PayPal. 

Scam
Buyer received item but says item not as expected. 
Files a claim with PP and can  get money back immediately if it is still in your account. 
They do not have to prove "not as expected". 
They do not have to send the item back to keep the refund. 

Questions :
What if they send back the wrong item
What if they send back an empty box. 

Now you have a worthless  counter claim.... 

Here is what I will be doing from now on. 
Remove all sources of payment from PP other than a prepaid card. 
Fund  prepaid only as needed for purchases. 
Remove all money from PP immediately up receiving. 

Should this protect me from the scammers? 

PayPal is a value tool

Many years ago I sold a Mac preamp to some guy in Italy.He filed a complaint with Paypal,that he hadn't received it.Paypal never bothered to inform me that a complaint had been filed.Anyway,I log into my Paypal account and find that $714 have been given back to the buyer.At that time Paypal had a money market fund that paid the highest rate in the country,so I left money at Paypal.Later,I found out that the Italian postal service is a mess and many sellers won't ship there.A few weeks later the buyer emails me that he received the preamp and the front glass is broken.I figure that being in the Italian post office for 5 weeks,they kicked it around and broke the glass.So,now I decide to file a damage claim with USPS.USPS says the buyer has already filed a claim and I can't.I inform Paypal and they tell me they sent me 4 emails during the original complaint period and I never responded.I know they never sent any emails but contacting Yahoo mail,I'm told that i can't prove that Paypal  never sent the emails.So,I give up and the buyer gets the preamp ,likely damage claim money and I'm out the preamp and shipping expense..Unless you are selling on Ebay and almost forced to accept Paypal,I would avoid Paypal.At least,if you use,have any money received transferred to a linked bank account asap after receiving any payments.

Suggestions for having PP tied to a basic checking/banking acct (min "$100" balance) not tied to any of ones major/personal funds is a very good idea.  However, in the OP's scenario, if PP tries to take $1k from your (basic) acct, wouldn't you incur overdraft fees or other headaches?