Is it permissible for a seller to accept a higher offer from another person after the first buyer has paid a down payment, and to return the down payment to the first buyer? And is this considered Najsh (collusive bidding/price manipulation)?

It is not permissible for anyone to sell over the sale of his brother or to buy over his purchase, due to the saying of the Prophet, peace and blessings be upon him: "None of you should sell over the sale of another, nor buy over the purchase of another, until he has made his purchase or given up." This means saying to someone who has bought an item during the option period, "Cancel it so I can sell it to you for less," or saying to the seller, "Cancel it so I can buy it from you for more." Najsh (inflating prices) is when a man offers a price for an item without intending to buy it, but rather to be followed and to deceive others.