You acted correctly in immediately notifying the buyer and refunding them. Did you cancel the transaction to get your final value fees back? If not, you should. Send the buyer a cancellation request.
I would also message the buyer, and let them know you will try to find the lost item. If found, you will message them to see if they are still interested. If so, you can do a buy it now listing at the original price, or slightly less, for them. This will get you a loyal buyer, but also give you good word of mouth advertising. Makes good business sense.
