PayPal Friends & Family listings. Why is this becoming so common?

“It seems like buyers demand around a 20% discount to take on the added risk of F&F. ”

I have not experienced that at all…my last 12 transactions on USAM, all F&F ranging between $16K - $150. I have sold items within 95% of my asking price. If a buyer wants protection, they can fork out 4% PayPal fee. IRS is a non-issue as you seldom make any profit when you reselling an item.

I should clarify, I see this situation happening when there is NO Paypal Goods & Services option. If you offer a 4% G&S option, that will build trust, and the buyer may decide that saving 4% is worth it. 

One thing I hadn't thought of before: Someone paying via paypal and in a few weeks damaging a product, then claiming item as broken to paypal.

This was reason I was given by a seller when I paid via PP (not F&F) and seller refunded my money as to avoid potential scam.

I've purchased several items with f&f with no issues.

I've now started asking buyers to use PayPal F&F or bank check, or even personal check (ships when cleared), not just because of the PayPal fees, but also because the new rules compel PayPal to generate a 1099 form, which complicates things enormously where I live. If it were only my federal/state  tax return I had to worry about, it wouldn't be that big an issue because I can document the purchase price if the item compared to the price it sold for (usually half or less of retail). But in my city, they now require us to get a business license and pay tax on the GROSS income amount for any 1099 amount in excess of $600, calling this a home-based business. That's kind of the final straw for me.