I'm lost I thought I did it right but it seems the buyer is going to pay 10.25 for a med flat rate box but is going to cost me more? why?

rates went up on domestic to 10.65

I understand the rates went up but it seems the rates where I live are like 12.35 that is 2.10 more then i anticipated. it may not seem like a lot but if this keeps happenning I will be losing out on some money right?

You should use calculated shipping by weight with regular priority, not the flat rate boxes.  Those boxes are so small, that unless the item it small & heavy, it's not worth the money.  This way it would figure the shipping cost for the buyer by his location.  Then if you print your label on Ebay, you get a discount, so it's even less.

Without the screen right in front of me, I'm trying to think...when you did the listing, does it give you the option to pick a flat rate box?  If so, next time, just put in Priority mail with the weight.  Do you have a postal scale?  If you are going to sell on Ebay long term, it's the best investment you can have.  You can't guess at the weight, because if you're wrong, it will cost you, so the scale is great.  You can find them on Ebay for about $20.

When you go to print the label, it may let you change the method from flat rate to reg. priority. 

A 1# box going from me (IL) to someone in CA, costs $6.45 at the PO or $6.02 if you print online.  A 1# item in a med. flat rate box is $12.35 at the PO or $11.20 online.  You get a discount if you print the labels through Ebay.

Until you get more familiar with it, you have to compare rates & methods.  If you ever have a really large or heavy box, UPS is way cheaper than USPS.