this is a difficult position to be in
ive actually been in the same position (well i sort of still am)
i sold a site last year to a large domain brokering site. They paid very promptly but asked if they could wait a few weeks to transfer the site over to themselves. I had no problem with this.
I contacted them a month later and advised that they had still not downloaded the site from my server or actioned the domain transfer
they thanked me for contacting them again and said they would proceed with it. They didnt and still havent. Ive still got the site - i put up a banner to my site on it and the site is small so its worth keeping around. When they get back to me ill send them the site.
With your situation i would do one of 2 things
1) keep the site hosted with yourself and contine to profit via banner impressions etc
or
2) refund the money to the guy and just sell it to someone else
let us all know how you get on
