The whole theory behind a deposit is that their item will be held, you can't sell it to anyone else, and they are accepting that risk by ponying up their money in order for it to happen.

If you were a store with a policy for refunds in place and lots of other customers in line...a refund would be understandable. As an individual who has basically been forced to provide free storage, shun all other buyers, waste your time, and provide a free savings bank for their money...I would tell them to screw off.