Update:
1. FedEx gave me a partial refund without me even submitting the paperwork and photos. Gave me $100. I was stupid to put that as item's value when I originally shipped it, instead of the about $130 I sold it for. Oh well, lesson learned... I suspect that one reason for them to closing the claim that fast was that I had never submitted any claims before that.
2. Buyer accepted a partial refund that was smaller than the full amount he paid but he got to keep the machine and did not have to pay for shipping it back to me. Gave me good feedback. So in the end we were both happy with the outcome.
So case closed. Definitely a learning experience for me. Thanks for all your suggestions.
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