Whenever you do a transaction that involves buying Bitcoins with Paypal it’s highly recommended that you use an Escrow service such as provided by Local Bitcoins. An Escrow service is basically a 3rd party that makes sure the transaction goes as planned. Using such a service helps you avoid scams and fraud.
Scams and fraud when buying Bitcoins with Paypal from individuals (and not from exchanges like VirWox) are not so rare.
It’s important to note that the only party that is actually exposed to risk in this sort of a transaction is the seller and not the buyer.
Usually what the scammer will do is suggest to buy Bitcoins from you, pay you with Paypal, and once the Bitcoins arrive to his wallet he will claim he never got them. Since Paypal in most cases support the complaining side, you will be left without your Bitcoins and your money.
So Escrow protects you from these scam by using the following process:
Step 1 – An Escrow transaction is initiated by either the buyer or the seller.
Step 2 – Buyer sends funds to the Escrow account.
Step 3 – After funds are received the seller is notified and sends Bitcoins to the buyer.
Step 4 – After buyer receives the Bitcoins the Escrow releases the funds to the seller.
In case that the buyer doesn’t receive the Bitcoins a dispute can be made and it’s up to the Escrow service to reach a verdict. It’s important to note that not all Escrow services are alike and you should also choose a trusted Escrow service to carry out the transaction. In some cases the Escrow service will cost a fee to process as well. One of the more reputable Bitcoin Escrow services around today is Local Bitcoins which also rates it’s users for trustworthiness.