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Without seeing the seller's side in this, I agree that you are owed a refund. Do you perhaps have copies of e-mail correspondences between the two of you that can be posted?
If you placed a deposit on an animal based on the fact that you could get the deposit back should you not be happy with the look of the babies after they shed, you should get your money back. You were offered a pick of the litter with your deposit. You were also offered the right to refuse and get a refund of your deposit should none of the animals meet your standards. The only one that DID meet your standards was the one Steve wanted to hold back. Now, Steve has hit a financial brick wall and offered to sell you this animal, but for higher than the $500 you were willing to pay for an animal from this litter. You have opted against purchasing that animal for the higher price.
The bottom line is, you were not happy with your choices and when you asked for a rightful refund of your deposit, you were denied. Sounds like a questionable person to deal with in my opinion.
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