Yes, this is the above-board way to do it. In negotiating the refund for "unwinding" the auction to the last legitimate bid, the buyer ought to be willing to share the cost of the fees that the seller will have to pay on the full Buy It Now price. I don't know what those are -- I've never sold anything -- but since it wasn't the seller's fault that the price was inflated by the false bid, the seller shouldn't have to eat the whole fee which is calculated on a gross price he's not actually going to get.