While there is very little one can do to reduce the risk of fraud and chargebacks with PayPal, covering all the bases is the best way to go about things. First of all, make sure the Bitcoin buyer has a verified PayPal account, as this indicates they have taken the time to properly set up the online payment option rather than create a new account with a stolen credit card. Even though this is no guarantee for success, it is a small step in the larger scheme of things.
Secondly, if you are dealing with a PayPal transfer outside of regular bitcoin trading platforms – such as LocalBitcoins – make sure to mention to the buyer how they should send the funds as a “gift.” This significantly reduces the chances of disputing the transfer, as “gift” transfers are not covered by PayPal’s Buyer Protection. If the person looking to buy your bitcoins does not agree with this, just cancel the deal and move on.
http://themerkle.com/news/taking-precautions-when-selling-bitcoin-for-paypal/
